Southern Q4 2021 Earnings Call Transcript

Quartr
Provided by Quartr
February 17, 2022

There are 11 speakers on the call.

Operator

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Southern Company 4th Quarter 2021 Earnings Call. All lines have been placed on mute to prevent any background noise. Quarter.

Operator

After the speakers' remarks, there will be a question and answer session. Quarter. I would now like to turn the call over to Mr. Scott Gallo, Investor Relations Director. Please go ahead, sir.

Speaker 1

Quarter. Thank you, Chris. Good afternoon, and welcome to Southern Company's year end 2021 earnings call. Quarter. Joining me today are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company and Dan Tucker, Chief Financial Officer.

Speaker 1

Quarter. Let me remind you, we'll be making forward looking statements today in addition to providing historical information. Various important factors quarter. This could cause actual results to differ materially from those indicated in the forward looking statements, including those discussed in our Form 10 ks, Form 10 Qs and subsequent filings. In addition, we will present non GAAP financial information on this call.

Speaker 1

Quarter. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call, quarter, which are both available on our Investor Relations website at investor. Southerncompany.com. At this time, I'll turn the call over to Tom. Quarter.

Speaker 2

Thank you, Scott. Good afternoon and thank you for joining us today. As you can see from the materials that we released this morning, we reported strong adjusted earnings per share for 2021, exceeding both our original 2021 guidance quarter and the estimate that we provided on our Q3 call. This performance is due in no small part to our outstanding service territories quarter and the unparalleled commitment of our employees to deliver clean, safe, reliable and affordable energy to our customers. Quarter.

Speaker 2

Our outstanding customer service, our commitment to the communities we serve and our proactive engagement with our stakeholders are selected in the numerous honors we've highlighted in our slide deck, including recent recognition as number 2 in the nation on Forbes 2020 2 list of America's Best Large Employers. Quarter. Many of the initiatives that support this distinction are reflected in our inaugural transformation report, which we released earlier this week. Quarter. This report details our sustained commitment and actions to further advance equity both within our company and our Days.

Speaker 2

These commitments allow Southern Company to help lead change within our communities and provide an enduring reflection of our values. Quarter. We are proud of the progress we have made and continue to recognize the opportunity to do more. As an example quarter. The work we're doing to drive our customer satisfaction results, a meaningful portion of our capital plans in recent years has been allocated to the continued modernization of our electric grids.

Speaker 2

Our grid quarter. Automation strategies and investments are delivering real value to customers. And in 2021, quarter. Our customers experienced 15% fewer minutes of interruptions. Similar initiatives will continue to be a major component of our capital plans going forward.

Speaker 2

Quarter. Across all of our stakeholder groups, including employees, customers, communities and investors, quarter. We're focused on sustainability and a long term view of value. That objective remains sound. Quarter.

Speaker 2

The long term financial plan that we outlined for you last year remains intact, and we are reaffirming quarter, our 5% to 7% long term growth rate expectation consistent with adjusted earnings per share in a range of $4 $4.30 in 2024. Let's now turn to an update regarding some of the recent developments related quarter to our progress on Plant Vogtle Units 34. As you can see in the materials provided earlier today, we updated our expected completion timeline for both units, extending the in service dates for each unit by 3 to 6 months. Quarter. As we discussed on previous calls, the paper process is a critical aspect of quarter Turning Plant Components and Systems Over from Construction to Testing and Operations.

Speaker 2

We have discovered incomplete and missing inspection records concerning much of the materials and equipment that have been installed at Unit 3. These inspection records are an important part of the documentation June that is necessary to file I tax. Our progress on Unit 3 I tax has slowed as we address quarter backlog of tens of thousands of inspection records needing completion to support system turnovers. Quarter. Through hard work over the last several weeks, we have reduced this backlog by more than 30%.

Speaker 2

Documentation within these inspection records is a critical aspect of getting it right. And the time and resources to complete the remaining inspection records and remediate construction issues identified in the process, including the impact of borrowing Unit 4 resources, quarter, our key drivers for the change in schedule. We have 123 ITACs remaining for Unit 3. Quarter. The revised ITAC completion schedule we've included in our slide deck is consistent with a 3 month change quarter in the Unit 3 schedule.

Speaker 2

Over the past year, a number of challenges, including shortcomings in construction and documentation quality quarter. We have continued to emerge adding to project timelines and costs. In recognition of the possibility quarter. For new challenges to emerge, we further risk adjusted our current forecast by establishing a range of 3 to 6 additional months for each unit and we've reserved for the maximum amount. Quarter.

Speaker 2

We continue to make meaningful progress on both units. Notably for Unit 3, all 157 fuel assemblies have been loaded into the Spent Fuel Pool in preparation for fuel load. For Unit 4, direct construction is now approximately 92% complete. Quarter. Open vessel testing has started and we recently completed the structural integrity and integrated leak rate tests quarter without issue.

Speaker 2

The aforementioned challenges on Unit 3 are serving as lessons learned Unit 4 and has benefited our performance on Unit 4 to date relative to Unit 3. 1st time quality on both construction and documentation are key areas of focus. Quarter. Our priority is bringing Vogtle Units 34 safely online and again to get it right, to provide Georgia with a reliable, carbon free energy resource for the next 60 to 80 years. With this most recent change in project cost and schedule, provisions in the Vogtle 3 and 4 co owner agreement came to the forefront, quarter requiring the owners to affirmatively vote to proceed with the project.

Speaker 2

Vogtle 3 and 4 is incredibly important to the state of Georgia and its robust growing economy. Furthermore, the addition of 2,000 megawatts of baseload Carbon free energy is vital to increasing the availability of net zero energy resources across the state. Quarter. Considering these facts and our proximity to commercial operation, Georgia Power has already voted to proceed. Quarter.

Speaker 2

The other owners are required to vote by March 8, which allows time for them to work through their own governance processes. Quarter. Consistent with the scheduled extension of up to 6 months additional for each unit, Georgia Power's share of the total project Capital Cost Forecast increased by $480,000,000 largely as a function of time, quarter. Additional resources to complete the remaining work with the necessary focus on quality construction and documentation and the replenishment of contingency. We continue working constructively with our co owners to resolve differing interpretations of the cost sharing agreement with an expected potential range of outcomes of $100,000,000 to $900,000,000 quarter.

Speaker 2

We have included $440,000,000 of the $900,000,000 in our total project cost estimate. Quarter. In aggregate, Georgia Power's resulting total capital cost forecast is $920,000,000 quarter. And as a result, Georgia Power recorded an after tax charge of $686,000,000 during the Q4. Quarter.

Speaker 2

We value our partners on Vogtle 3 and 4 and the relationship we've had with them across multiple assets for decades. We look forward to our continued partnership on each new unit as they transition to commercial operation, quarter providing millions of Georgians with clean, safe, reliable and affordable electricity for decades to come. Quarter. Before turning the call over to Dan for an update on our 2021 financial performance and our long term outlook, quarter. I'd like to briefly touch on Georgia Power's Triennial Integrated Resource Plan or IRP, quarter, which was filed with the Georgia Public Service Commission late last month.

Speaker 2

The proposed plan sets forth a proactive, innovative and transformational roadmap for how Georgia Power expects to support customers in its growing service territory for decades to come. Quarter. Consistent with Southern Company's path to net zero carbon emissions, the plan describes a tangible path quarter to transition Georgia Power's generating fleet to cleaner, more economical resources. This plan includes retirement of all quarter of the coal units Georgia Power Controls by 2028, except for Plant Bone Units 34, quarter, which are scheduled to be retired no later than 2,035. The plan also includes a request for the addition of 6,000 Megawatts of Renewable Generation by 2,035, more than doubling Georgia Power's current renewable resources.

Speaker 2

Quarter. Additionally, 1,000 megawatts of storage is requested by 2,030 to quarter to improve the capacity value of these intermittent resources. In recognition of the changing energy landscape, Georgia Power proposed innovative programs to promote reliability and resilience, including a distributed energy resource program. Quarter. The comprehensive long term plan also addresses continued investment in our transmission system and energy efficiency programs for customers.

Speaker 2

Quarter. The IRP is subject to the review and approval of the Georgia Public Service Commission. Hearings will take place during the first half of twenty twenty one quarter with a final decision due this summer. Dan, I'll turn the call over now to you. Please take it away.

Speaker 3

Quarter. Thanks, Tom, and good afternoon, everyone. All of our major subsidiaries had a strong 2021. As a result, quarter. Our full year adjusted earnings were $3.41 per share, dollars 0.16 higher than adjusted results in $2,020.06 above the top end of our original 2021 guidance range.

Speaker 3

Financial performance for the year was highlighted by strong customer growth, quarter, improving retail sales trends and continued investment in our state regulated utilities. These positive quarters were partially offset by milder temperatures throughout 2021, resulting in a negative $0.05 variance for weather as compared to 2020 quarter and a negative $0.14 variance compared to normal weather. Additionally, 2021 non fuel O and M reflected a trend quarter towards more normal operating conditions relative to the significantly reduced levels in 2020. A detailed reconciliation of our reported and adjusted results compared to 2020 is included in today's release and earnings package. Quarter.

Speaker 3

Weather adjusted retail electricity sales were up 2.4% compared to 2020, approximately 1% quarter better than our forecast for 2021. Almost all of this positive variance can be accounted for in residential electricity sales quarter as a result of continued robust customer growth and an extension of the increased usage trends, which began in 2020. Quarter. Residential sales outpaced our expectation for the year by 2.7%, reflecting what we think quarter could represent a transition to sustained hybrid work practices across our service areas. We continue to analyze retail electricity sales relative to pre pandemic levels and in aggregate in the Q4, our weather normalized retail electric sales exceeded sales in the Q4 of 2019.

Speaker 3

Quarter. We are encouraged by these trends and will continue to monitor the implications of supply chain constraints, labor force participation and inflation pressures quarter outlook. Our stronger than expected customer growth is a trend that differentiates our service territories. Over the last two years, quarter. We've added an average of nearly 55,000 new residential electric customers and 30,000 residential natural gas customers quarter across our regulated utilities.

Speaker 3

Average residential electric customer additions were 43% higher quarter over the past 2 years than the average for the 5 years ended in 2019. Customer growth continues to be driven by a strong labor market recovery quarter and our Southeast territories are on track to reach pre pandemic levels of employment later this year. Quarter. Further supporting these trends, the economic development pipeline within our Southeast service territories remains robust. Quarter.

Speaker 3

For example, the average number of job announcements was 22% higher and business investment in Georgia was 39% higher than the average for the years leading up to the pandemic. Macro trends in e commerce and electric transportation, quarter, combined with a diverse well trained workforce and a low cost of living have combined to drive major locations and expansions of distribution centers, data centers, manufacturing facilities and headquarters into our service territories. Quarter. Turning now to our expectations for 2022. Our adjusted earnings guidance for the year quarter is $3.50 to $3.60 per share.

Speaker 3

The $3.55 midpoint represents a growth rate of approximately 7.5% from the midpoint of our original 2021 guidance range. Quarter. In the Q1 of 2022, we estimate that we will earn $0.90 per share. Included in our guidance is a more normalized assumption session for retail electric sales growth of 0% to 1%, although a continuation of recent trends could deliver upside to that assumption. Quarter.

Speaker 3

We continue to see long term adjusted EPS growth in the range of 5% to 7%, consistent with adjusted quarter earnings in a range of $4 to $4.30 per share in 2024, with 90% of total projected earnings quarter. Over the 5 year planning horizon coming from our state regulated utilities, our expected EPS trajectory has a solid foundation. Quarter. Additionally, our history of constructive regulation, strong credit ratings and disciplined O and M spending serve to strengthen our outlook. Quarter.

Speaker 3

Underlying our long term adjusted EPS growth rate of 5% to 7% is a robust capital investment plan that continues to be driven by significant investment in our state regulated businesses. Our base capital investment plan of approximately $41,000,000,000 quarter, which excludes the capital required to complete Vogtle Units 34, supports our 2024 estimate for adjusted earnings per share of $4 quarter to $4.30 This forecast represents a $2,000,000,000 increase in state regulated utility investment quarter for the common years 2022 through 2025 from our forecast a year ago. These increases in our forecast quarter results are the result of greater visibility into investments to upgrade our enterprise applications, serve major known customer expansions or quarter. Further improve our grid and protect our technology infrastructure as well as investments related to the transition of our fleet. Quarter.

Speaker 3

We have long maintained a disciplined approach to capital forecasting within our state regulated utility businesses. Quarter. We don't use placeholders and we don't include capital that isn't expected to earn our allowed returns. Quarter. The result of this approach is that our forecast tend to grow, especially in the latter years as our visibility quarter.

Speaker 3

As regulatory processes unfold, as compliance obligations evolve quarter and as our long term system planning is refined. We fully expect this trend to continue, including in relation to Georgia Power's IRP. Quarter. For example, neither the long term hydro investment plan nor the proposed company owned energy storage systems are fully reflected in our forecast. Additionally, none of the renewable additions proposed in the IRP are included due to both their timeframes and the potential quarter for selecting Purchased Resources.

Speaker 3

Furthermore, we continue to believe Southern Power has significant opportunity to continue growing through investments to facilitate fleet transitions and the growth in clean energy infrastructure broadly across the United States. Quarter. Southern Power's model has been distinctive since its beginnings in the early 2000s, focused on long contracts with creditworthy counterparties and a risk adjusted return profile that marries well with our overall value proposition. While we expect near term opportunities to meet our criteria to be modest. We do believe opportunities will accelerate in future years.

Speaker 3

We've allocated up to $3,000,000,000 to Southern Power over the 5 year plan with approximately $250,000,000 in 2022, $500,000,000 in 2023 $750,000,000 annually for the remainder of the forecast. Again, these allocations of capital are not included in our base capital forecasts. Quarter. In aggregate, our financial plan is anchored to our base capital forecast of $41,000,000,000 and we believe upside potential exists

Speaker 4

quarter. In our

Speaker 5

state regulated

Speaker 3

utility forecasts and our Southern Power allocation, representing spending of over $44,000,000,000 quarter as part of our strategy to sustainably drive long term growth in earnings and dividends. Quarter. We also believe many of the same drivers for additional potential investment over the next 5 years could translate to investment opportunities beyond 2026 quarter as we continue on our journey to net 0. And finally, we've included an updated 3 year financing plan in the quarter and full year 2019. This plan, which is consistent with our updated capital investment plans and the potential capital investment opportunities we've highlighted, quarter.

Speaker 3

Continues to assume no equity need over our 5 year plan horizon. Credit quality and strong investment grade credit ratings quarter and a top priority. The expected improvement in our consolidated FFO to debt metrics equates to 200 basis to 300 basis a 200 to 300 basis point increase from 2021 and 2022 levels by 2024. Quarter. We've included a slide in the appendix to highlight some of the drivers for this expected improvement.

Speaker 3

Combined with the expected reduction in construction risk over the next 12 to 18 months. We believe we are well positioned to support our credit quality objectives. Quarter. Tom, I'll turn the call back over to you.

Speaker 2

Thanks, Dan. Southern Company strives to deliver superior risk adjusted total shareholder returns. Quarter. And I believe the plan that we've laid out supports that objective. Our customer and community focused business model, quarter.

Speaker 2

Our growing investments into our premier state regulated utility franchises, the priority we place on credit quality quarter and our commitment and actions towards net zero all contribute towards making Southern Company a sustainable premier investment. Quarter. A remarkable track record for dividends is another major contributor to that equation. For nearly 3 quarters of a century, quarter. We have paid a quarterly dividend that is equal to or greater than the previous quarter, including dividend increases quarter in each of the past 20 years.

Speaker 2

As we look ahead, assuming adjusted earnings within our estimated range of $4 to $4.30 per share in 20.24, a payout ratio that is expected to be at or below 70% and a sustainable long term adjusted EPS growth rate of 5% to 7%. Quarter. We believe that once Vogtle 3 and 4 are completed, our Board will have the opportunity quarter to consider an increase in the rate of growth of dividends, further solidifying our long term value proposition. Quarter. Thank you for joining us this afternoon.

Speaker 2

Operator, we are now ready to take questions.

Operator

Quarter. Thank you. Followed by the 4 on your telephone. You will hear a 3 tone prompt to acknowledge your request. If your question has been answered and would like to dryer registration.

Operator

Quarter. Quarter. Our first question is from the line of Julien Dumoulin Smith with Bank of America. Please go ahead.

Speaker 5

Quarter. Absolutely. A pleasure. Thank you. Likewise.

Speaker 5

Quarter. So absolutely, cool. Hey, listen, on the incremental cost, I just want to break this down, if you will. I mean, it's quarter. A lot of numbers flying around here, if you can.

Speaker 5

So of the $440,000,000 you talked about in incremental cost, quarter. How much of that is driven by the co owners agreement? Can you break that down, right? So you've got 180 from the sharing band. Quarter.

Speaker 5

And then above that sharing band, what percentage of the cost is born to you, if you will? So can you kind of break down the sort of the successive pies, if you will? Quarter. And then of that, what was the base project cost that was agreed upon with Koner's? And what was the decision on COVID related costs, right?

Speaker 5

Emphasis on that last piece, if you don't mind.

Speaker 3

So Julien, this is Dan. So the $440,000,000 you absolutely hit right. Within there is $180,000,000 That $180,000,000 is consistent with provisions and our agreement with co owners where Georgia Power quarter that bears a fixed percentage of incremental cost up to a certain point. And so that $180,000,000 is the maximum amount of exposure under those provisions. Above the thresholds for those provisions is where this option to tender quarter.

Speaker 3

Cost responsibility to Georgia Power kicks in. And that number embedded in the $440,000,000 is $260,000,000 So what that represents is Georgia Power's assumption of bearing $260,000,000 said a different way, 100% of all the dollars above the threshold. So that $2.60 represents their share is already captured in the $480,000,000 quarter. This is capturing the co owner's piece that is assumed in these numbers to be tendered. And what was the second part of your question, Julian?

Speaker 5

Quarter. Well, COVID related costs, I've got a follow-up more holistic as well.

Speaker 3

Yes. So quarter. As we've disclosed and we talked about last quarter, there is differing interpretations quarter. In this co owner agreement as to exactly how those provisions work and exactly what the starting point works. So rather than air those specific differences here on the call.

Speaker 3

Let's let those conversations take place in the proper form. But suffice it to say, the two differing quarter. Points of View is the starting point for where the initial provisions kick in and how COVID costs ultimately adjust any cost before sharing.

Speaker 2

Quarter. Hey, and Dan, one more point, I think, and please, I know you'll correct me if I get this wrong. But we've associated the cost with tender quarter. In this estimate, we have not given any credit for the value of megawatts tendered. At the high end of the estimate, The amount of megawatts tendered, if everybody tendered, maybe around 75 to 80 megawatts.

Speaker 2

At the level in which we've estimated, we think it could be around 30. That's correct, Tom. Quarter. We think it could be around 30. That's correct, Tom.

Speaker 2

And we've given no credit to any value associated with those megawatts. Quarter. We've talked about this on prior calls, the fact that you may have megawatts that's going to be carbon free, resilient for decades to come. Quarter. We think it would have real value.

Speaker 2

We've reflected no value in any of these estimates.

Speaker 3

And just to put a finer point on all this, Julian, we've included this $440,000,000 quarter. And that represents an estimate of an outcome. We do not at this stage have an agreement with our co owners. We still have that difference of opinion.

Speaker 5

Right, exactly. And maybe can you speak a little bit to this process then, right? You talked about this March 8 date with the co owners here. Any initial indications on where they stand? Obviously, this 90% is a high bar, but quarter.

Speaker 5

Theoretically, they could vote to proceed and then related to that, they could tender the incremental cost to you, right? I just want to make sure I understand there are kind of 2 separate parallel processes here.

Speaker 2

Yes. Julian, the way we would think about that is make them completely separate, quarter. Okay. Well, the process is simple. By the contract that we entered into way back when what was it 2018, I guess, and I guess we signed it in early 2019.

Speaker 2

But that kind of provision spoke to quarter. A potential outcome that was really onerous, like there was some cataclysmic problem and we could all go our ways. Quarter. Our calculus was pretty simple. We are this close to loading fuel and ultimately getting Unit 3 on service and then ultimately Unit 4.

Speaker 2

To us, it was an easy decision to proceed.

Speaker 5

Got it. All right. The processes are separate. And from their perspective, quarter. They could in theory vote to proceed and then ultimately allocate tender their megawatts to you as you just talked about a moment ago, right?

Speaker 3

Quarter. They're completely separate processes, yes.

Speaker 2

So they could decide to proceed and separately vacant tender.

Speaker 3

That's right. And there's a 120 day to 180 day clock that we've disclosed in our 10 ks as well that quarter. It's really the time period to clarify tender or not. And the ultimate calculation, we alluded quarter. The megawatts we alluded to dollars, all of that would not get buttoned up until Unit 4 was in service and all of the costs were known.

Speaker 3

Quarter. All right.

Speaker 5

Excellent. Thank you guys for the clarity. Dan, well stated.

Speaker 3

You bet, Julien. Thanks, Budd.

Operator

Quarter. Our next question is from the line of Shar Pourreza with Guggenheim. Please go ahead.

Speaker 2

Hey, Shar. Thanks for joining us.

Speaker 6

Quarter. Hey, Tom. It's actually James Ward on for Shar. Thank you for taking the question.

Operator

Oh, you bet.

Speaker 5

Hey. Quarter. Tom, at a

Speaker 6

high level, when we think about the IRPs and let's say Georgia Power specifically, as you were mentioning before, quarter. I understand that any storage or hydro improvement spend would be incremental, but what about transmission? Quarter. Is there any IRP related spend baked into the $41,000,000,000 base plan? Or is anything that comes out of the IRP going to be incremental.

Speaker 3

Hey, James, this is Dan. So yes, there is quarter. Transmission spend in there in this forecast period for the 5 years, it is modest. Keep in mind that quarter. The plan includes retiring coal units in the 20 27, 20 28 timeframe and then further again in 2,035.

Speaker 3

So the timeline quarter to construct and frankly plan and permit these transmission projects is going to take the bulk of this forecast period and spending really occurs beyond. The other detail, James, and the way you asked your question, I just want to make sure it's clear. There is some storage reflected in the capital forecast, but not quarter. It's a fraction of what has been assumed as a planning assumption in the IRP. It's the one project that Georgia Power is specifically asking for approval of is in our capital plan.

Speaker 2

And the only other thing I'll

Speaker 6

add is

Speaker 2

that go ahead.

Speaker 6

Sorry, please go ahead.

Speaker 2

The only other thing I will add, I think I've done this before in kind of private conversation with you all 1 on 1. But quarter. As you start thinking about retiring Vogtle, I mean, I'm sorry, G Wizz, Bowen 34, there creates a need in North Georgia. And we've talked about quarter. Further study is required in order to evaluate how you replace that.

Speaker 2

Is that going to be more solar? Is it going to be combined cycle? Is it going to be importing megawatts from the south to the north and therefore incremental transmission? We just haven't done all that work yet.

Speaker 6

Quarter. Got you. Got you. Okay. That's very helpful.

Speaker 6

Appreciate the color there. Switching gears to asset optimization, quarter. Understanding that you do not need equity in the 5 year plan, you've been very clear about that. But when you look at LDC's trading hands at nearly 2x rate base. How do you think about the opportunity to sell an asset at that level and then reinvest proceeds into your decarbonization efforts at your electric utilities.

Speaker 2

Well, I think we've demonstrated over the years that we're both quarter. In the world of M and A, we're both buyers and sellers. What we're always seeking to do is put assets in the hands of the best owner. Quarter. That's just kind of our dogma and I think we follow through on it.

Speaker 2

What's interesting about our gas properties Line Replacement Programs. Since the acquisition of what is now Southern Company Gas, we have well exceeded quarter. So in order to think about quarter. Cap allocation as you do and we think about it all the time. Selling something like our asset in Illinois relative to Reinvesting in the Core.

Speaker 2

We always have to consider what's best for our long term growth rate, Woods Pass on a risk adjusted basis. We'll continually do that. Yes. And James, you made the point

Speaker 3

in your question. I mean, we don't have an identified equity need in the forecast and we think our LDCs are great property.

Speaker 2

Yes. Quarter. It would be purely a value play as opposed to a need.

Speaker 6

Right. Got you. Quarter. And then one final one here, just to follow on from Julian's question earlier. To clarify here, so quarter.

Speaker 6

Given that the Vogtle co owners are already protected by cost caps and this is just at a high level here, is there any incentive or other reason that quarter. We should be aware of or that might be worth keeping in mind for why Oglethorpe or EMEA would not want to proceed at this point quarter. Since they have those cost caps in place, just to help us understand what they might be thinking.

Speaker 2

We're not aware of any reason That exists like that.

Speaker 6

Got it.

Speaker 3

They have to go through their process, Jim.

Speaker 5

Got it.

Speaker 6

Thank you very much. Those are all my questions.

Operator

Quarter. Our next question is from the line of Jeremy Tonet with JPMorgan. Please go ahead.

Speaker 2

Hey, Jeremy. Hi, good afternoon. Quarter.

Speaker 7

Thanks for having me here.

Speaker 8

Yes, sir. Maybe just come back to Vogtle real quick here. Quarter. Just trying to get a little bit more clarity. Have any of the missing inspection reports resulted in the need to rework completed sections of the plan.

Speaker 8

And also just curious if the NRC is kind of weighed in here on the i-tech issue and any thoughts you have as far as what could be done in the future for Vogtle 4 to controls that could be implemented to avoid these issues?

Speaker 2

Quarter. Yes. Interestingly, I was just in Augusta visiting with Glenn Schick, quarter. I think he's just a superlative manager of the site along with Steve Kaczynski and we actually went through different systems at this point and we are trying. We are efforting to begin with the inspection report fix quarter with what we believe are the toughest, hardest issues to deal with.

Speaker 2

Can't guarantee that, but so far with 30% complete, We haven't found the need for any of that comprehensive rework. Certainly, as we see things, that aren't according to specs or Per an inspection requirement, then we will fix it, but nothing comprehensive as you're suggesting. Second question.

Speaker 8

Well, I was just curious, I guess, that's helpful there. Thank you for that. And The NRC, if they've kind of weighed in on the high-tech issues in any kind

Speaker 2

of Oh, NRC. Yes.

Speaker 6

Yes.

Speaker 2

Yes. Thanks, Jeremy. Hey, quarter. The NRC's posture, again, I think I say this pretty regularly, they're a very quarter, tough requiring regulator, but we think they do a great job. And that's the reason why the United States Nuclear Fleet.

Speaker 2

It is the envy of the world. Getting it right, as we so often say, will allow us to have an asset that will quarter. Provide Energy Carbon Free Resilient for 60 to 80 years. So we're all in on getting it right. Quarter.

Speaker 2

The NRC likewise is their primary focus. In other words, they're not as concerned, I'm guessing, with schedule and cost. Quarter. They want to make sure that whatever we build is as appropriate to nuclear safety standards as exists in America today. So, they support our efforts to find these things.

Speaker 2

And I think, for the quarter. Amount of ITAKs that we've already submitted, something like 275 or so. I think we've had very few problems of those ITACs. That process has gone well, which says that once we get the work packages turned over and all the paper done in nuclear standard as it is supposed to be. We've had an enormous success rate in dealing with the NRC part of the equation.

Speaker 8

Got it. That's really helpful there. And then just pivoting a bit towards SMRs. Just wondering if you could discuss Southern's involvement with of SMRs and where you see the tech going over the coming years. And do you think there will be support to rate basis spend if the technology is proven up in the future?

Speaker 8

Just wondering if you've had conversations with commissioners or other stakeholders on if this could be a potential down the road.

Speaker 2

Yes. Stations with kind of future nuclear technologies have really been more I haven't talked to the states at all. That really would be the realm of Mark Crosswhite in Alabama or Chris Womack in Georgia or Anthony Wilson in Mississippi. In my conversations with DOE, quarter. With folks in that ilk or in the administration, I've had those conversations too.

Speaker 2

In my opinion, quarter. I know other people are more bullish on SMRs than I am, but you still have to deal with enormous security issues. You still have to deal with quarter. Kind of the NIMBY issues associated with nuclear. So I've always felt that nuclear lends itself to scale.

Speaker 2

Now, quarter. SMRs do absolutely have an important place in our nuclear future. My opinion, it would be in the niche areas like military bases. The military already does SMRs on submarines and aircraft carriers. So quarter.

Speaker 2

It's easy to conceive SMR showing up on big nuclear installations. It also provides them a degree of resilience. I get that. Quarter. We have been and we participate in SMRs.

Speaker 2

You should know that. So, our nuclear team and our R and D team are involved in the SMR process. We've actually been asked to get involved in a significant way in SMRs. And given, quarter. I don't want to be distracted with anything other than getting Vogtle 3 and 4 done.

Speaker 2

We've really stayed away from that. On the other hand, we view great progress potential with the so called Gen 4 reactors, the molten chloride salts. We've worked with Bill Gates and his team on that. We are when you think about the R and D S curve, I think we've done a lot of work on the science, I would call it the bench science of it and the very small kind of, element of starting up that S curve. The next kind of big slugs of development on the Gen 4 reactors will require 100 of 1,000,000 of dollars.

Speaker 2

I know I've talked to Secretary Granholm, Deputy Secretary Turk, other folks quarter that it would be great as the DOE is looking to put money to work, especially in the technology development area. Quarter. This is a place where we could partner with the federal government and really move quickly up that S curve quarter to make Gen 4 reactors a commercial reality. In our own planning processes, they start to show up as an option quarter. Probably in the late 2030.

Speaker 2

So let's say, 2,035 to 2,040. Quarter. And as an economic matter, they tend to compete with CCS controlled combined cycle technologies. Quarter. So depending on how the technology and cost expectations evolve, you will see us either continue with combined cycles and capturing the carbon and sequestering it or pursuing new Gen 4 reactors.

Speaker 2

But again, That's an issue that's going to show up in the very late 2030s.

Speaker 8

Got it. Maybe just a real quick follow-up here. Curious on Advanced Nuclear. Thanks for your thoughts there. But as far as what technologies could make the most sense, just wondering light water, what Volvo is doing versus molten salt or other technologies.

Speaker 8

Just wondering what you think of give and takes between them?

Speaker 2

Quarter. Well, I think, wait, the obvious difference between kind of what we're building at Vogtle and the so called Gen 4 reactors This issue of the fuel and the core. Quarter. Effectively, the Gen 4 reactors have the characteristic that a meltdown is virtually impossible. And therefore, you need less containment structures and therefore less capital cost in order to put those units into play and have them be quarter.

Speaker 2

As safe as we expect them to be. That is the real big difference. It's a capital cost difference associated with quarter.

Speaker 8

Very helpful. I'll leave it there. Thanks so much.

Speaker 2

Quarter. Thank you.

Operator

Our next question is from the line of Angie Storozynski with Seaport Global. Please go ahead.

Speaker 8

Hey, Angie, great to

Speaker 5

have you with us.

Speaker 4

Thanks. Quarter. So I have a question. I don't think I've ever actually asked the question about Southern Power. So I'm looking at your past disclosure.

Speaker 4

And it seems like your gas plans are only hedged to about 80%, meaning the contract for about 80 percent of the output. We've seen quite an expansion of spark spreads across the country. I struggle with your regions. So it's what Georgia, Alabama and North Carolina. I'm not sure if that translates into hire dispatch or earnings of these assets.

Speaker 4

Again, if you could comment.

Speaker 2

Yes, Angie, I don't know, we'd have to run the numbers down with you. Our own math would say they're 92% contracted for about 10 years.

Speaker 3

Yes. And importantly, Angie, so quarter. In front of the Georgia Public Service Commission as part of the IRP, the vast majority of the gas PPAs quarter that are in front of them for approval are Southern Power Gas Plants. And so that's going to extend Those units coverage for another 10 years.

Speaker 2

And recall that we follow the same kind of rubric in contracting our assets as opposed to merchant players In that, we don't take fuel risk. We earn a return on and return of capital and pass through the fuel and energy price.

Speaker 4

Okay. Just moving on

Speaker 2

In fact, Angie, somebody just showed me something else.

Speaker 4

Yes.

Speaker 2

Angie, excuse me, one more I'll just give you one more data point. 95% contracted through 2026, 92% through 2,031. Quarter. That's the nerdy data.

Speaker 4

Good. Now just going back to Vogtle. So quarter. Yes, I've read I actually just reread the agreement, the ownership agreement and set additional background about COVID related costs. Quarter.

Speaker 4

We are still seemingly in the COVID era. So I'm assuming that at least some of this incremental cost related to the asset is quarter. So related to COVID and how does that come into this whole discussion about the sharing agreement quarter with the co owners. And then secondly, we haven't you haven't mentioned inflation. And so I'm just wondering how is that quarter.

Speaker 4

The cost profile of this construction project.

Speaker 2

Quarter. Yes, and thanks for that. This is my opinion I'm giving you as opposed to fact, I guess. But in my opinion, quarter. It is unquestionable.

Speaker 2

It is unreasonable to assume that COVID had no impact. And so the real art of quarter. The deal is to figure out how much of that impact manifested itself. If you dial God, to those dark days when the first COVID thing hit and we were deciding whether to shut the project down or not. Quarter.

Speaker 2

I think it's very clear that we had to operate under a completely different operating regime on the site. Remember, we stood up a medical village. We did all sorts of things in order to continue this very important project. We have estimates that we provided the Georgia Public Service Commission. I don't think we've updated those recently.

Speaker 2

But certainly, quarter. I think any reasonable person would say that there have been COVID impacts on the site.

Speaker 3

Quarter. Yes. And I would just say in terms of this most recent cost increase, it's certainly not the driver, it's not a major driver, but Tom's point, it's quarter. Logically an element of what's going on.

Speaker 2

And I think we provided the chart in the appendix material. You can see even this most recent, whatever the saying, Omicron. It had an enormous spike in the December to January timeframe. So quarter. Certainly, it had an impact.

Speaker 2

We saw it in, especially over the holidays. We always expect to see more absenteeism and a variety of other things. We certainly saw it there as well.

Speaker 3

But it's fair to say like everyone is with every wave, with every impact, we are getting better working in this environment and it becomes increasingly less disruptive and thus less of a cost impact.

Speaker 2

And let me hit one other kind of controversial point, but we watch this like hawks. Recall at one time we had 9,000 people on-site quarter. And there was a lot of concern, was this somehow a COVID hotbed? Well, in fact, the data shows that our COVID experience is just about similar to the surrounding communities. We don't have a different experience on the site than in the surrounding counties.

Speaker 4

Yes. Thank you. How about inflation though? Is it already embedded in this additional cost estimate?

Speaker 2

Quarter. Yes. But Angie, most of the inflation sensitive stuff is already procured. Our supply chains are already spoken for all the major equipments there. Quarter.

Speaker 2

I suppose there would be some labor. We're paying top decile right now. Quarter. I suppose that could come up later, but it hasn't been a big effect now.

Speaker 4

Okay. And then the last question. Quarter. Looking how strong your earnings were, I mean have been actually over the last couple of years. Now quarter despite unfavorable weather.

Speaker 4

So is the load growth the main driver quarter. Or is it just cost efficiencies? What is putting you above the high end of your guidance almost consistently despite unfavorable weather?

Speaker 2

Quarter. Well, Dan has done a great job managing the cost structures of the system. Actually, it didn't have anything to do with it. All the people in the operating companies did. Quarter.

Speaker 2

But I'll tell you the big surprise. I said this on Squawk Box this morning and the data we've provided you shows it. We beat quarter. Our residential estimates by 2.7%. In other words, we were projecting that to be down and it was actually up.

Speaker 2

Quarter. And we think that that is due to a change in lifestyle. I think we budgeted as if we thought there was this return to work. Quarter. And therefore, we would see like a 2.2% reduction in residential sales Because people are showing up at work.

Speaker 2

Well, in fact, our own data, if you look at Southern Company's experience, quarter. Our old model was about 80% of the people came to work every day. I think now and there were 20% that were virtual, probably call centers. Now we're seeing about only 25% are here every day With about 50% hybrid, they were coming in and out a few days a week, some more, some less, and then about 25% virtual. What's interesting about that is the sales in the residential sector quarter.

Speaker 2

We're sustained at a much higher level than what we thought. We thought they'd drop off, they actually increased a bit. That uplift really helped us this year. Quarter. Yes.

Speaker 2

And just as you look at

Speaker 3

our forecast, look, we certainly haven't assumed that, that continues into the future because 1 year doesn't make a trend, but we quarter. Reasonably believe it might. So if you look at our forecast for residential sales for 2022, it actually reflects year over year negative and that's quarter, frankly mitigated by assumption of strong customer growth. So to your point, Andrew, there's certainly upside even in 2022 if we see these trends Continue.

Speaker 2

The customer growth has been awfully attractive for us, so over 50,000 on the electric side, what was it, 27,000 something like that quarter. On the gas side, so we continue to do that and we think that is kind of a function too of people being able to work remotely. Quarter. And so they tend to go to places that have low input costs, attractive place to live. Our economic development data shows that as well.

Speaker 2

So I think some of the stuff, Dan, you talked about in the script, quarter. It just looks good, particularly for Georgia, but even Alabama is coming back and we're doing well. We have reason to be bullish about the long term viability of our franchise.

Speaker 4

Very good. Thank you.

Speaker 2

Quarter. Thank you, Andrew. Thank you.

Operator

Quarter. Our next question is from the line of Steve Fleishman with Wolfe Research. Please go ahead.

Speaker 5

Hello, Steve. Yes, thank you. Good afternoon.

Speaker 9

Hey. Quarter. Yes, you too, Tom and Dan.

Speaker 3

Thank you.

Speaker 9

So, two questions. First, just on the Vogtle, hi tech issues. So quarter. I know you knew all along that the paperwork and the trail and all that was super important and quarter. You've been doing all the work.

Speaker 9

So kind of could you give us a little flavor of just what has gone wrong here because quarter. Obviously, it's something that you were very focused on from the beginning.

Speaker 2

100%, Steve. And I think, quarter. I said this in media earlier, but it's true. I get up every morning throughout the day in the middle of the night Think about Vogtle and what we can do and all that. And I was the folks at the site have been particularly frustrated at this recent development.

Speaker 2

Quarter. When we left you on the call and I guess it was late October, early November, everybody, the site too, was very bullish on the fact Man, here we go. We're getting ready to file for 103 gs and load fuel and the whole bit. Quarter. And when we started getting into the final systems related to the final ITAK, so quarter.

Speaker 2

Right. We've done 100 and I mean, we've done 275, we had 123 left. We had already done quarter. In order to complete these tests and a lot of this equipment has already operated within the testing regimes, quarter. We had done physical and visual inspections, but what we found when we got ready to turn over quarter.

Speaker 2

For the paper, an important part of the paper quarter. And we found in many cases, they were just either incomplete or missing. Let me give you an example. Quarter. But this is an example, this is relevant.

Speaker 2

For every bolt in that plant theoretically, We would have to ascertain, certificate the provenance of that bolt. In other words, we'd have proof that we know that the metallurgy worked and where it came from and everything else. To the extent an inspection report did not account for the provenance of a bolt. We had to either take the bolt out and put in the bolt that was certified or take the bolt out and test it to make sure that it met our standards. This is at the very end of the process for the very final equipment and systems that were related to the turnover before we filed for 103 gs.

Speaker 2

This is at the tail end of the process. And we found this out. We just had to go stop. We've got to do a complete review of all of these inspection reports. And that's what you see right now.

Speaker 9

Got it.

Speaker 2

I am frustrated about it, but it is something we have to do. We talk about This is the first plant we've constructed in 40 years. Well, this is the 1st nuclear documentation we've had to do in 40 years. I wish we had found it sooner, we just didn't. Quarter.

Speaker 9

Okay. And then totally separate topic. You were, I think Tom, pretty accurate quarter with caution about the Build Back Better getting done last year. And I'm just curious quarter. How you're feeling about maybe a climate only type package getting done in Congress this year?

Speaker 2

Strictly my opinion, and I was in the meeting with the President and all that. You know what's interesting, quarter. And I work with both sides of the aisle here. I think long term, both parties agree that we should do company. I think the methods of doing something, especially in light of the inflation signals we are seeing and potentially the national security issues we are seeing right now lend themselves to nothing happening for the rest of the year.

Speaker 2

I wish it would. I don't think it will.

Speaker 9

Great. Okay. I appreciate your thoughts. Thank you.

Speaker 2

Quarter. Yes, sir.

Operator

Our next question is from the line of Paul Fremont with Mizuho. Please go ahead.

Speaker 2

Hey, Paul, always great to have you with us.

Speaker 10

Thanks a lot. Quarter. I guess my first question is going to be on turnovers. I think initially you had talked about doing some of the turnovers, Those that were necessary to load fuel and delaying other turnovers that you thought were less necessary. Quarter.

Speaker 10

In light of the documentation issues, are you now looking to do all of the turnovers before you load fuel?

Speaker 2

No. I think there's a set you have to turn over in order to get to 103 gs And there could be some others in between 103 gs and loading fuel. Let me give you a little bit of kind of where we are. So on Unit 3, now I'm doing big hunky things. Quarter.

Speaker 2

There's a little less than 100 systems, 96 or so. You would split those into 162 subsystems, okay. So quarter. There's 11 total to go. And since our last call, we've gotten 5 of those turnovers complete.

Speaker 2

If I think about quarter. What's remaining here, I would say that we have 3 to go for 103 gs quarter and 6 to go on fuel load and 2 that we can complete after fuel load. They're quarter. Not necessary to the nuclear safety side of things. Was that helpful?

Speaker 10

Quarter. In the past, I think you've estimated or you've put out estimates of COVID related costs quarter that went as high as $400,000,000 In the upcoming VCM 26 filing, are you going to update your estimate of COVID related costs or not.

Speaker 2

Yes. The $400,000,000 $444,000,000 was at 100 percent dollars. Our share of that was 160. I don't know the status of that. It didn't come up recently.

Speaker 2

So I think it's still an open issue.

Speaker 3

Yes. And there was some degree of quarter. Estimating future impacts in the original number and I think it's been consistent with that. Yes.

Speaker 2

We've not provided that on the call.

Speaker 10

Is that 440, The sort of the most recent number that you've put out publicly.

Speaker 2

Quarter. Yes.

Speaker 3

Yes. And so you typically see us disclose it as $160 to $200,000 That's our share.

Speaker 5

The

Speaker 3

$440 is $100 Okay. And just to be clear, no change reflected in BCM26.

Speaker 10

Quarter. You're

Speaker 5

saying no

Speaker 3

change? Correct.

Speaker 10

In VCM 26, perfect.

Speaker 2

We just haven't quarter. Created an addition based on the latest omicron effect. I mean, clearly, there were, we just haven't updated the estimate.

Speaker 10

And then the numbers you put out for the cost sharing potential write offs after tax numbers, Can we get pre tax numbers for those?

Speaker 6

The 4.80 and the 4.40?

Speaker 3

Yes. Those are pretax, Paul. Those are pretax.

Speaker 2

So that adds 920,686 is the after tax portion.

Speaker 3

Yes.

Speaker 5

If quarter.

Speaker 3

If you look at our deck on Slide 6, there's 920 listed there, that's pretax. Total after tax for that is 6.86 We've broken down the components, but all that breakdown is pretax.

Speaker 10

All that is? Pretax, okay. Quarter. Are you in being able to sort of do mid-thirty types numbers once you're able to sort of do the catch up work on the documentation.

Speaker 2

Yes, Paul, and what you have to understand and back where we were in October, November, quarter. We're basically finishing the work and what we found is the inspection reports were lacking. So this work is ready to go. The table is set. Quarter.

Speaker 2

Once we get the documentation done, we'll be ready to send those things in. We feel good about this schedule. It's not that we're finishing construction.

Speaker 10

And in terms of the so are you completely done with all of the construction or the remediation work Unit 3 that you had identified sort of in the fall.

Speaker 2

Yes. No, I meant I just mentioned like example of some of the remediation that might have to be done in order to conform with an inspection report. So there's other examples, but that's it.

Speaker 10

Quarter. Okay. And then maybe the last question, the contracting of the Southern Power Plants under the Georgia IRP, quarter. It sounds like the net income that you're earning is based on some book value calculation on the plan. So would the Georgia IRP, if it were adopted, at least with respect to the Southern Power Plants, likely the earnings from those plants would remain quarter.

Speaker 10

Roughly the same or would there be any type of sort of would there be any material change?

Speaker 3

Quarter. I think the short answer, Paul, is no material change. These are market contracts. So all of these contracts are being awarded to Southern Power under a competitive RFP key process. And so it's going to reflect the current market for those 10 year contracts.

Speaker 2

Over the life of the contract, the IRRs would be similar. Quarter. And when you think about and what we have said about the market broadly is that we've kind of pulled back from the market. This is kind of elsewhere in the United States Because there was so much supply and the demand was waning and there was a lot of uncertainty, we saw the margins quarter. Really getting tight and so we didn't play.

Speaker 2

But for the things we do that we ultimately will sign up for, pretty consistent IRRs and pretty consistent ROEs. The ROEs typically are a wee bit better than what we would find in our regulated jurisdiction, reflective of a little bit of the higher risk.

Speaker 10

Great. And the last question for me, the 686, Should we assume either equity or asset sales to fund that?

Speaker 3

Quarter. So again, we I think I said in my prepared remarks, Paul, that we don't see a need for equity in this 5 year outlook. So let me just hit that quarter. A little more broadly because I think it's important. Look, absolutely nothing has changed about our near term or long term objectives when it comes quarter.

Speaker 3

To credit quality, look, as we've said kind of over the last several months that as we move closer to completion of the project, quarter. Any change in the cost or schedule, we'll evaluate to see if equity is needed, essentially because we are getting quarter. So close to the end and because of all the proactive things that we did in response to other changes. And frankly, we did a little bit more quarter. So that has positioned us really well.

Speaker 3

And I want to also emphasize the improvement in the metrics quarter that comes later on. I think we put a slide in the appendix that shows some of the component of the uplift in FFO that will occur in the 'twenty three, 'twenty four timeframe. That also is Near enough in time horizon to give us comfort with our overall financial profile.

Speaker 10

Great. I think that's it in terms of questions. Thank you.

Speaker 2

Awesome.

Operator

Quarter. Our next question is from the line of Michael Lapides with Goldman Sachs.

Speaker 7

Please go ahead. Quarter. Hey guys, Tom. Hey, Michael. How are you doing?

Speaker 7

I'm all right guys. Thank you for taking my question. I appreciate you taking the time. Quarter. Commodity prices are up across the board, obviously.

Speaker 7

That's a bigger issue than any quarter. Team or person can manage. How should we think about given what's happened to commodity prices quarter. And given the investment you're making, some of which like Vogtle will help reduce the commodity exposure, how should we just think about the bill across year. Your biggest businesses.

Speaker 7

So I'm thinking Alabama and Georgia Power. I'm thinking about the bill and for Southern Company Gas. Like what's happening to the total bill for the customer as week.

Speaker 2

Yes. It's interesting stuff, man. When you look at the data, quarter. Gas prices increased 21 versus 20, 92%. You like, we average, I think $3.82 per million BTU versus $1.99 a year ago.

Speaker 2

So that's kind of a big deal. Now, quarter. Each of our jurisdictions have managed, I think, well, their unrecovered fuel balances. Georgia just got an increase. It doesn't wipe it out completely, but it did really well.

Speaker 2

Alabama used some of its quarter earnings, otherwise in 2021 to completely wipe out its fuel balance. Quarter. So one of the things we are very mindful of and I appreciate the way you phrased the question. We are very mindful of burden to customers quarter. We manage that like hawks.

Speaker 2

I think we're in really good shape right now. Okay.

Speaker 7

I quarter. I know you've done a lot of work over the years with the Federal Reserve in Atlanta. Just curious how the commodity when you think about just the economic impact to the service territory. And you've got a high growth service territory relative to a lot of your peers. How does this kind of quarter.

Speaker 7

How do you think about it when you meet with folks outside of the company about what it means for economic growth?

Speaker 2

Quarter. Yes, very interesting stuff. If you look at the data, we're seeing even our industrial numbers, I said this on Squawk today, quarter. While it will show that, it looks like things are slowing down a bit on the industrial sales side, the momentum numbers would tell you that. That's essentially the first derivative.

Speaker 2

Quarter. In fact, 2 of the segments that underperformed or decreased year over year were chemicals and paper, but quarter. The paper was newsprint, had a big closure of plant there. The chemicals was a chemical plant, caustic sodas and chlorine. That closed as well.

Speaker 2

If you wipe away those 2 big plant closures, our industrial sales actually were better than what we expected again. Quarter. So, pretty good stuff. Now, it is very clear that inflation will eventually eat into quarter. The growth in the economy.

Speaker 2

I was kind of visiting with some of the Fed work and all that here recently. Quarter. You're familiar with the old permanent income hypothesis. I think people have felt wealthier lately and quarter. People are still spending as if inflation hasn't visited them yet.

Speaker 2

It is inconceivable though that that won't catch up at some point. You saw all these hot retail sales. My sense is as inflation effects continue Those sales will start to wane. So there will be a slowdown in the economy. Now the real quarter.

Speaker 2

$50,000 question is, when does inflation start to recede a bit? Quarter. Lot of stuff right now says that's a 2023 issue that we could start to see inflation getting back to a more normal level. Quarter. I think the underlying presumption in that one is that the supply chain works itself out.

Speaker 2

Right now, we've had quarter. Such an imbalance in supply and demand that prices invariably are high. And for the lead time to procure certain Goods and Services. It is really sticky right now. So the big swings are quarter, supply chain unwinding and getting back to normal.

Speaker 2

People adjusting to higher prices and therefore reduce spending and therefore reduce heat in the economy. Quarter. Those are all the factors that I think will go into this point. For now, quarter. The economy looks really good in the Southeast, but it's inconceivable to me that it won't slow down a bit quarter over the next year or so.

Speaker 2

Got it.

Speaker 7

And then one last one, just thinking about whether you do the gigawatt of Storage at Georgia Power. Obviously, that kind of depends on the end of the IRP process, as well as if you were to wind doing more incremental solar at either Georgia or Alabama Power or at Southern Power. How are you thinking about the renewable supply quarter. And because there's been lots of discussion and commentary, 1 or 2 of your peers have talked about supply chain becoming an issue for their non regulated contracted solar business. I'm just curious what insights your team is getting in terms of the ability to procure things like panels or lithium ion other and the ability to actually install at the pace you'd like to install.

Speaker 3

Yes. So Michael, this is Dan. So right now, we're not quarter. We're in a big construction period and so we're fortunate to not be experiencing as acutely as some of our peers right now some of those delays. We've seen some.

Speaker 3

We are In the middle of a storage project out in California, we've seen some modest delays, but nothing that's going to impact the project overall. That's part of the supply chain and then really combined with how everyone is seeing the near term markets is why we also have this ramp up in our expectations for Southern Power. You heard me say we've allocated just the $250,000,000 this year, dollars 500,000,000 the following year. And that's really in recognition that there are projects actively on our radar screen today and we're a bit aspirational that those might come to fruition. But to the extent they don't, I think what you'll see us logically do is push those dollars out a little further in time and have opportunities later.

Speaker 2

Quarter. There's another conversation that I've been having in D. C, whether it's Secretary Granholm, who's been terrific or DevSec, David Turk is a terrific guy. As a matter of national security, quarter. As a matter of economic opportunity, one of the things that we need to do as a nation is resource quarter.

Speaker 2

These important supply chains domestically that will grow manufacturing, grow jobs, grow personal incomes. It's a real winner. Quarter. And I think some of the money that's been put out in the incentives, whether it's inside DOE right now or in the infrastructure bill elsewhere, is to think about ways to promote, the domestic supply of these things and really get it going. Now, when I say that quarter.

Speaker 2

You're talking 5 years from now. That isn't going to happen immediately, but people are considering it. And I bet you, You would get broad bipartisan support for that strategy.

Speaker 7

Got it. Thank you, Tom. Thanks, Dan.

Speaker 2

You bet, Michael.

Operator

Quarter. And that does conclude our question and answer session. Sir, are there any closing remarks?

Speaker 2

Quarter. Thank you all for attending with us this afternoon. This is an important call. This is a quarter. Frustrating time for us all.

Speaker 2

We were ready to go there, we thought, kind of early this year. And now with this delay, it looks as if We'll be end of the year for Unit 3 and we've allowed for an additional quarter just given the uncertainty that we've seen in the past. We think these schedules align closer to what the staff and the commission has been kind of thinking about. But I can assure you we're on the case. We all spend our time at the site.

Speaker 2

Those people are fixated on getting it right along our partners, Bechtel. Quarter. And when we build this thing, we get it in service, we are right at the end of that process. It will be of the quality that is necessary quarter in the United States Nuclear Industry, and we're going to be proud of it for decades to come. Otherwise, quarter.

Speaker 2

The company is performing as well as it possibly can, whether it's our reliability, our resilience, our customer satisfaction, the way our employees feel. We were number 1 in military employer. Quarter. Look, all of these data, they sound like kind of headlines and billboards and pablum. But I think they really speak to our dogma here at Southern, that this is a company built to last, that these indicators quarter.

Speaker 2

Our things that will prove that we are sustainable in our business model for years years to come. And we're very proud of that. Quarter. And I want to thank all the thousands of employees at Southern for making that their part of their day every day. It's way beyond making, moving and selling.

Speaker 2

It's all wound up and making sure that the communities we serve are better off because we're there. Quarter. We do that every day and we will continue to do that. We look forward to getting the projects behind us and getting into 2024 quarter financial position, the integrity of this company will be better than it ever has been in my experience. So thank you

Operator

quarter. Thank you, sir. Ladies and gentlemen, this concludes The Southern Company 4th Quarter 2021 Earnings Call. You may now disconnect.

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Southern Q4 2021
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