Southern Q1 2023 Earnings Call Transcript

Presentation

[Operator]

Good afternoon. My name is Kathy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company First Quarter 2023 Earnings Call. [Operator Instructions].

I will now turn the conference over to Mr. Scott Gammill, Vice President, Investor Relations and Treasurer. Please go ahead, sir.

[Scott Gammill, VP of IR & Treasurer at Southern]

Thank you, Kathy. Good afternoon, and welcome to Southern Company's first quarter 2023 earnings call. Joining me today are Chris Womack, President of Southern Company; and Dan Tucker, Chief Financial Officer. Let me remind you, we'll be making forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements including those discussed in our Form 10-K, Form 10-Q and subsequent filings.

In addition, we will present non-GAAP financial information on this call. 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, which are both available on our Investor Relations website at investor.southerncompany.com.

At this time, I will turn the call over to Chris Womack.

[Christopher C. Womack, CEO at Southern]

Thank you, Scott, and good afternoon and thank you for joining us. I am delighted to be joining you today on my first earnings call as President of Southern Company. I've enjoyed getting the opportunity to interact with many of you over the last couple of months and look forward to meeting with many more of you in the months ahead. I am incredibly excited about the future of Southern Company, the energy industry and the valuable work that we're doing to serve our customers and communities. I am excited about the opportunities ahead of us and proud to be a part of a team that is making such a significant impact in building the future of energy. As you've watched us reposition our talented bench across the system, our mission remains unchanged, provide our customers and communities with clean, safe, reliable and full affordable energy while continuing to keep our customers at the center of everything we do.

Also unchanged is our goal to deliver superior risk-adjusted total shareholder return and I believe our financial plan supports that objective. The strength of our value proposition is a function of our customer and community focused business model, the robust economic growth in our service territories and the constructive regulatory frameworks in our states. It is also a function of our discipline as we remain committed to our objectives of strong investment-grade credit ratings with a regular, predictable and sustainable dividend policy. Along with our focus on long-term execution and value accretion, we are executing alone on our plans as we as - and believe we're well-positioned to achieve our financial objectives for 2023.

Dan, I will now turn the call over to you for our financial update.

[Daniel S. Tucker, Executive VP & CFO at Southern]

Thanks, Chris, and good afternoon, everyone. For the first quarter of 2023, our adjusted EPS was $0.79 per share, $0.18 lower than the first quarter of 2022 and $0.09 above our estimate. The major driver for the variance to last year was milder than normal weather as the first quarter of 2023 was the warmest on record in the Southeast. Higher depreciation and amortization and interest expense also impacted earnings for the first quarter compared to last year and were somewhat offset by constructive state regulatory actions. A complete reconciliation of our year-over-year earnings is included in the materials we released this morning.

When looking at adjusted EPS impact compared to our estimate for the quarter the main drivers were strong start for our state regulated natural gas utilities and continued strong electric and gas customer growth. Given the mid February timing of our last earnings call, we were able to factor milder than normal January and February weather into our estimate for the quarter. So weather was not a major driver of our performance versus our estimate. You may recall that our adjusted earnings in the first half of 2022 were significantly better than projected due to weather and other market-driven factors. Our early 2022 outperformance supported our full year adjusted EPS performance and enabled us to accelerate maintenance activities in several areas of the business. Those initiatives had us well-positioned with additional spending flexibility entering 2023 such that we expect a significant weather impact we experienced in January and February should be manageable over the remainder of the year assuming a return to more normal weather throughout the balance of the year.

Turning now to retail sales in the economy in the first quarter weather normal electric retail sales were 0.4% higher than the first quarter of 2022. This increase reflects stronger residential and commercial sales from continued robust net in migration to our service territories, a strong labor market and a return to more normal business trends. Industrial sales for the quarter were down 1.6% as we are beginning to see weakness in housing related sectors such as stone, clay and glass, lumber and textiles due to inflationary pressures and higher interest rates. Half of the industrial variance for the quarter compared to last year can be attributed to the closure of a caustic soda manufacturing facility in Alabama. Excluding the impact of this single customer, industrial sales were down approximately 0.8%.

In a trend that continues to differentiate our Southeast service territories for many other areas of the country we once again saw record levels of economic development activity for job creation and capital investment announcements at all time highs in the first quarter. We are beginning to see supplier announcements related to the Rivian and Hyundai electric vehicle manufacturing facilities in Georgia with six supplier announcements made during the quarter totaling over 4200 jobs and nearly $2 billion in capital investment. We expect additional automotive supplier announcements in the coming months. Beyond the automotive industry Qcells recently announced a new two $1 billion solar panel and component manufacturing facility in Georgia, which is expected to create 2000 jobs.

Additionally, the Port of Savannah continues to set records boasting its highest national market-share ever and second busiest February on record. The Port continues to expand capacity including the recent announcement of the addition of 55 electric cranes which are expected to eliminate 500,000 gallons of diesel consumption and related emissions per year.

Before I turn the call back over to Chris, I'd like to call your attention to our recent dividend increase. At its last meeting the Southern Company Board of Directors approved an $0.08 per share increase in our common dividend raising our annualized rate to $2.80 per share. This action marks our 22nd consecutive annual increase and for 76 consecutive years dating all the way back to 1948, Southern Company has paid a dividend that was equal to or greater than the previous year. This remarkable track record supports Southern Company's value proposition.

And lastly from me our adjusted EPS estimate for the second quarter is $0.75 per share. Chris I'll turn it back over to you.

[Christopher C. Womack, CEO at Southern]

Thank you, Dan. Before taking your questions, I'd like to first provide an update on recent progress on Plant Vogtle Units 3 and 4. Importantly, the projected completion timeline and capital cost forecast for both units are unchanged from the updates that we provided last quarter. Since that time we've seen sustained progress consistent with our expectations for each unit. At Unit three, we've achieved initial criticality in March and successfully synced to the grid earlier this month.

We continue to work through final startup testing and commissioning and are currently performing testing at the 50% thermal power plateau. This testing is expected to continue in the coming weeks with extensions to higher power plateaus and forced trips to test the units safety systems. Following completion of this final testing sequencing and consistent with our long term plans we expect Unit 3 to enter into a brief maintenance outage window before returning to full power. After the successful completion of all appropriate pre-operational and power extension testing as well as any necessary fine tuning, Unit 3 will be ready for commercial operations. We continued to project placing in Unit 3 in service in May or June of 2023.

Turning now to Unit 4, substantial progress continued throughout the last quarter with hot functional testing commencing in March, with lessons learned from Unit 3 continuing to benefit our execution on Unit 4. Hot functional testing is approximately 80% complete. We have already achieved peak plan output of the test and are currently in the process of cooling the unit back down with progress throughout the test that has been consistent with our plan. We project to complete hot functional testing in the coming weeks to be followed by a plant inspections and surveillance along with the middle of our final [Indecipherable] receipt of the 103(g) finding from the NRC and fuel load later this year. Only six systems remain for turnover to testing for Unit 4 and we continue to project an in-service date between late fourth quarter 2023 and the end of the first quarter 2024. We look forward to sharing our exciting progress in the weeks and months ahead as we bring these units online to provide reliable carbon-free energy to the benefit of our customers in the State of Georgia for decades to come.

Enclosing, I'd like to highlight the Southern Company was named the top utility on Forbes Magazine Best Large Employers in America 2023 rankings. We ranked nearly 100 places higher than next industry peer and the top 15 of the 500 large employers ranked for the second consecutive year. Being recognized amongst the best in the nation once again is an honor. This accolade is particularly gratifying because it is directly based on employee feedback. We are committed to creating a workplace where all groups are well-represented included in fairly treated with all - within all levels of the organization and that - and that everyone feels welcome, valued and respected. At Southern Company, we aspire to be a leader in our industry. As such, we will continue to strive to create the best workplace possible for our thousands of team members who worked tirelessly each and every day to provide World-class service to the customers that we have the privilege to serve.

Thank you for joining us this afternoon. Operator, we're now ready to take questions.

Questions and Answers

[Operator]

Thank you. [Operator Instructions].

And our first question comes from the line of Steve Fleishman with Wolfe Research. Please proceed.

[Christopher C. Womack, CEO at Southern]

Hi, Steve. Good afternoon.

[Steven I Fleishman, MD & Senior Analyst at Southern]

Hey, good afternoon, Chris. Congrats on your first call on your role.

[Christopher C. Womack, CEO at Southern]

Thank you.

[Steven I Fleishman, MD & Senior Analyst at Southern]

You bet. [Indecipherable] time-out there. I'm sure he is listening, but could you just remind us for the prudency filing in Georgia when that would - when that comes in, roughly when that's going to be scheduled this year?

[Christopher C. Womack, CEO at Southern]

It is scheduled to come as we fuel load on Unit 4. Right now, we're looking to - for Unit - for fuel load to occur in the July timeframe. So we will work - we will work with the commission and the staff on moving through that process, but it will get started as we enter fuel load on Unit 4.

[Steven I Fleishman, MD & Senior Analyst at Southern]

Okay. And take like I think most things take six months pretty much.

[Christopher C. Womack, CEO at Southern]

Yeah we expect six months is the timeframe we expect today.

[Steven I Fleishman, MD & Senior Analyst at Southern]

Okay. And then I think, I know you mentioned the remaining process for Unit 3 startup, but just the testing so far I mean obviously you kept the timeline, but so far in the testing is it fair to say, everything has gone as planned, are there any issues that have come up, just any, color there?

[Christopher C. Womack, CEO at Southern]

And Steve. I think as you've - as you've seen before things do come up. I would say testing has gone very well. We've experienced some trips and the systems operated as they should, but we worked our way through it but we continue to proceed and move ahead. So - so far so good, but we know there is first time start-up there is always issues. This is why we test, and we're focused on the secondary side. But I'd say, so far so good, but we continue to - testing is always a process that will go through to make sure we're ready for commercial operation.

[Steven I Fleishman, MD & Senior Analyst at Southern]

Yeah, okay. Thank you very much.

[Christopher C. Womack, CEO at Southern]

Thanks, Steve.

[Operator]

Our next question comes from the line of Shar Pourreza with Guggenheim Partners. Please proceed.

[Christopher C. Womack, CEO at Southern]

Hey Shar, good afternoon to you my friend.

[Shahriar Pourreza, Senior Managing Director at Southern]

Good afternoon. Chris you guys - Chris you guys recently just around the 24 guidance kind of loaded on the back of ongoing inflation and interest rates. I guess how are you seeing things develop now and do you see kind of opportunities to manage your exposure like we saw with the - the prior convertible note issued in February, got a bit of a better sales outlook today. I guess what are some of the pushes intakes since you revised that 23 guide, it seems like there is some incremental tailwinds here? Thanks.

[Christopher C. Womack, CEO at Southern]

Shar, you asked us about 23 or 24.

[Shahriar Pourreza, Senior Managing Director at Southern]

24.

[Christopher C. Womack, CEO at Southern]

Okay, so I'm going to - let me start then I'll kick it to Dan, we moved the lower end of [Indecipherable] down because as we - as we pushed out I expect the start up of commercial on Unit 4. We moved that. We lowered the range down to 395, so that was based on the push on the schedule for Unit 4. Dan, you want to comment on any other aspects of our guidance.

[Daniel S. Tucker, Executive VP & CFO at Southern]

Yeah, just following on to what Chris said, once we have clarity, which again will be the end of this year, early next year on Unit 4 will narrow that 2024 guidance down to something that's more akin to what we typically do to go around a $0.10 range or so based on the actual in-service date. All the other moving parts, you mentioned, Shar we kind of are where we were, we are executing in a way to make sure that we're managing where we need to, will continue to be creative and thoughtful around how we're financing particularly at the parent company. I think the convertible deal was a tremendous success. We'll see what other opportunities we have, not necessarily that specific instrument, but just to be opportunistic in the way we do that. And then from a cost perspective, everyone is seeing pressures and we are no different, but we've got a lot of efforts underway to make sure that we're running the business as efficiently as we can in a way that continues to support that guidance range.

[Shahriar Pourreza, Senior Managing Director at Southern]

Got it and then just, Chris, kind of curious maybe just your overall thoughts on the cost side, because Southern doesn't really have a stated cost cutting target like some of your peers despite obviously you guys managing O&M fairly well. I guess looking at things kind of from a fresh lens, are you seeing opportunities to cut cost incremental to your current plan maybe at the Holdco level like shared services or even at the Opcos. I mean I guess is there any opportunity to see as a new CEO that could be added if the plan as we're thinking about maybe further streamlining the business?

[Christopher C. Womack, CEO at Southern]

[Indecipherable] out I would say it's a wonderful question not build-on what Dan has said. I mean, we will continue to look at how we can run this business more efficiently. I mean, there are opportunities to create shared service, opportunity to find efficiencies in places, we will do that. As you know, there is a lot of conversation and interest, and we take it very seriously the issue of affordability and so we will continue to find ways to put downward pressure on our pricing, find ways to look at the interest rate and inflation implications, but look to find ways to make sure about O&M perspective that is either flat or declining over our forecast periods. So we will continue to do that and pursue those kind of opportunities and we've done it in the past and we'll continue to do it in the future.

[Daniel S. Tucker, Executive VP & CFO at Southern]

And I'd say in addition to particularly the shared service up as Chris mentioned, one of the other great opportunities we have, which you'd hope we would have is to really optimize how are internal resources are deployed between operating expenses and capital investments. So we're certainly doing everything we can to optimize the way they are deployed to focus on our capital spend and reduce costs at the same time.

[Shahriar Pourreza, Senior Managing Director at Southern]

Terrific. Thanks guys and congrats Chris on your first call of many. I appreciate it.

[Christopher C. Womack, CEO at Southern]

Again, Shar. I thank you very much.

[Operator]

And our next question comes from the line of Ross Fowler with UBS. Please proceed.

[Christopher C. Womack, CEO at Southern]

Hey, Ross. Good afternoon

[Ross Fowler, Analsyt at Southern]

Good afternoon, Chris. Afternoon Dan. So, Dan I just wanted to go through the seasonality again, you kind of - you kind of brought it up in your prepared remarks, I just want to make sure I fully understand the drivers there. [Indecipherable] went over $2 in the first half of 2022 and you've got a little over above $50 in the first half of 2023, so if I heard you correctly, you said that that outperformance in 2022 largely to pull lot of O&M forward into the year. So that's part of it, but there is other pieces here accumulating. One would be [Indecipherable] reduction in part of the Vogtle penalty once Unit 3 goes in and then I think there were some sharing outside the band in Q4 of last year. So other than those three pieces, is there anything I'm missing around sort of getting - getting back into the guidance range with a better second half number this year versus last?

[Daniel S. Tucker, Executive VP & CFO at Southern]

Yeah, now in terms of giving back, but just in terms of making those comparisons year-over-year and also think the other important moving part that we saw in the first half of last year that really helped us get up to that strong start was earnings that were really driven by were energy prices were so not only on our regulated side we had some commercial industrial pricing that benefited from that, but also on the Southern Power side got off to a great start just because of where market energy prices were allowed us to do a lot of those things, so when you're doing a year-over-year comparison that will be a difference, big thing that you brought up, that's just not as obvious, always looking at this is the kind of rebates or refunds back to customers notion that was a significant element of the second half of last year, if you combine all of our jurisdictions in terms of either what was accrued to refund back the customers or what was put into regulatory reserves that we have this reliability reserves in some of our jurisdictions. That was $0.33 just in the fourth quarter. And so that's a pretty significant year-over-year reconciling item that won't necessarily be there this year, but we'll still be able to support that $3.60 as a midpoint.

[Ross Fowler, Analsyt at Southern]

Thanks for that Dan and then on the industrial sales decline, you mentioned about half of that was sort of worn-off item due to the caustic soda facility. The restaurants, kind of like seen in lateral housing related sectors, maybe at housing, what are you seeing for the economic backdrop currently, in that context?

[Daniel S. Tucker, Executive VP & CFO at Southern]

Yeah, it's still, I want Chris to kind of add on to this, but just from an overall sales perspective, still seeing year-over-year growth in a lot of sectors, there is a bit of slowing going on, but the overall strength here in the Southeast continues to show itself. Chris, you are gonna add anything there.

[Christopher C. Womack, CEO at Southern]

Yeah, and so we look at the economic development pipeline here in the Southeast, which remains to be robust. I look at first-quarter 23 versus the first quarter 22, announced projects expect like 10000 plus jobs and some $4 billion of investment here in Georgia and then Alabama also sees increases around EV and batteries blockchain. And the pipeline continues to be very full. So we continue to be excited about the economic activity, the economic development pipeline, from population growth and migration to the customer growth, we saw some 11,000 on the electric side, some 6,000 on the gas side. So we continue to see very positive factors that - some people say there may be a recession, but we think here in [Indecipherable] territory, maybe lessened because it is ongoing continued economic strengthening, economic activity that we continue to see.

[Ross Fowler, Analsyt at Southern]

That's great presentation that Dan and maybe, maybe this is an unfair question, but I'm going to pose it anyway. How do you think about, I mean, we've seen in the press this week an EPA power plant will potentially coming around natural gas and emissions reductions, how do you think about that in terms of sustainability achievement versus affordability and reliability because natural gas is definitely needed for both of those things as we walk-through the energy transition, what are the risks and opportunities around that type of regulation?

[Christopher C. Womack, CEO at Southern]

Yes, let me break that up in two parts. I mean I think in terms of the proposal. I'm using the process before and that will go through a number of different iterations and if when there is a final rule, we'll assess it and understanding and figure out what it means to us. I mean, we have been pursuing our fleet transition, our focus on sustainability and with a real commitment of balancing affordability were sustainability moving toward net 0. I mean, and we'll continue to do that as we go through this fleet transition. So, our path will continue and so whenever a new rule comes out, we'll take a look at it. I would also say, I think for the economy natural gas is very important - natural gas is important to this country, to the economy, to a lot of regions that cannot from an affordable - affordability standpoint make a transition to all-electric and so I think from a national energy policy standpoint I think it's important to recognize the importance of natural gas as we go forward. So that would be my response to that question.

[Ross Fowler, Analsyt at Southern]

Yeah could agree more, Chris. Thank you very much.

[Daniel S. Tucker, Executive VP & CFO at Southern]

Thanks, Ross.

[Operator]

And our next question comes from the line of Julien Dumoulin-Smith with Bank of America. Please proceed.

[Christopher C. Womack, CEO at Southern]

Hey Julien,how are you this afternoon my friend.

[Julien Dumoulin-Smith, Analyst at Bank of America]

Hey, hey absolutely. Thank you for the time Chris, appreciate it. [Indecipherable] congrats again.

[Christopher C. Womack, CEO at Southern]

Thanks man.

[Julien Dumoulin-Smith, Analyst at Bank of America]

[Indecipherable] absolutely affect value. So with that said, look I want to pivot back to the credit conversation as we kind of pivot out of the U3, U4 you look at the timeline is getting a little bit narrower year. What are you guys thinking today about the prospects of credit improvement. What kind of metrics would you want to target. Obviously, you've seen some gyrations there through the course of construction. How far do you want to go on that improvement side. What does that mean in terms of like targeted broad metrics again I get that the rating agencies have different metrics, they target and then ultimately, what does that translate to in terms of the target FFO for you guys and the timeline there in right as you look at this in service?

[Daniel S. Tucker, Executive VP & CFO at Southern]

Yeah, Julien. Dan, so. Look, with once Vogtle 3 and 4 is in service reflected in rates from a cash flow perspective, and we've talked about this before, it's about a $700 million improvement in our operating cash flow and thus improvement in FFO. From an FFO to debt perspective, what that means is, given the rest of our business, combined with that improvement, we should be comfortably in a let's just call it 17ish zone from an FFO-to-debt, it could be as high as 18 in years, could be in the high 16s but comfortably above certainly current ratings thresholds and what I've continue to articulate is an objective to have all of our regulated utilities in the A category and our parent company at BBB+ and I think we can achieve that without having to do anything but execute.

[Julien Dumoulin-Smith, Analyst at Bank of America]

Right but that a further improvement in terms of the underlying metrics per se?

[Daniel S. Tucker, Executive VP & CFO at Southern]

Absolutely.

[Julien Dumoulin-Smith, Analyst at Bank of America]

Okay, and then, sorry, if I can pivot one more subject here. Just to touch on Georgia and Georgia Power specifically around solar opportunity. I know that IRAs unlock certain opportunities. I know that this is in-flight in the process, but maybe not necessarily ripe but prospects for investing on that front. Obviously, you've had the Southern Power placeholder, but I'm focused more specifically on solar at Georgia Power and/or any of the other opcos today post IRA and given the opportunity?

[Christopher C. Womack, CEO at Southern]

Yeah and, Julien as you know - we have opportunities to resolve the 2022 integrated resource plan, but also with the inflation reduction we think as the level of the playing field between from tax policy, it offers us the opportunity to own renewables ourselves and so our teams are looking at the opportunities and we'll be working with the commissions to pursue those opportunities for us to to build-in all more renewables as we go-forward, taking advantage of the opportunities that the Inflation Reduction Act affords us. And the opportunity we have is not just looking at the lease costs, but also about who is the best cost owner of these projects going forward. So it's a wonderful opportunity for us, but also I think as you mentioned, there are also opportunities for Southern Power as we go-forward. So there are wonderful opportunities for us as we go-forward and we looking forward to fully investigating and executing around.

[Julien Dumoulin-Smith, Analyst at Bank of America]

Yeah, but maybe in the next quarter or so, we'll get a little bit more detail there.

[Christopher C. Womack, CEO at Southern]

We will keep you posted.

[Julien Dumoulin-Smith, Analyst at Bank of America]

All right. Excellent. We'll leave it at that. Thank you, guys, good luck, I will see you soon.

[Christopher C. Womack, CEO at Southern]

Thanks, Julien.

[Operator]

And our next question corresponding David Arcaro with Morgan Stanley. Please proceed.

[Christopher C. Womack, CEO at Southern]

Hey David. Good afternoon.

[David Arcaro, Executive Director at Southern]

Hey, there, good afternoon and thanks so much for your time. A couple of quick questions on the Vogtle units. I was wondering when would we expect Unit 3 to be running at full capacity. We've seen it ramping up and down, getting to 50% power wondering when we might see that at full capacity and then - just on that Unit 2, have the - I think you touched on this before, but has the testing and running so far been going smoothly enough to to not push-out any like incremental delays within the May to June timeframe.

[Christopher C. Womack, CEO at Southern]

No and so, David, we're not announcing any schedule or cost estimate increases. Harvested Power sometime in May. I mean, we're working through the process. We're doing all the testing and we're ramping-up. I would say, look for some time in May to get to a 100% power.

[David Arcaro, Executive Director at Southern]

Okay, got it, thanks. And then on Unit 4 just during hot functional I guess similar question, have you seen any issues pop-up during that testing phase, that would add incremental time even within the 4Q to 1Q24 window.

[Christopher C. Womack, CEO at Southern]

And I think as we said, we're about 80% complete on hot functional on Unit 4 and I think it is clear that we have taken lessons learned from our Unit 3 experience and there are no issues to note. And so I'd say, so far so good and may if you recall, you may recall Unit 3 took us about 94 days. And so we're now 80% complete and if we stay on schedule sometime in early May, we will conclude hot functional testing and and then look toward critical path items of [Indecipherable] and testing and looking toward fuel load sometime in July. So, so far so good. So that's kind of that's where we are. But we've been the lessons learned from Unit 3, Unit 4, I think clearly reflecting is showing up as we go through hot functional testing on Unit 4.

[David Arcaro, Executive Director at Southern]

Okay, great, that's good to hear. Thanks so much.

[Christopher C. Womack, CEO at Southern]

Thank you very much.

[Operator]

Our next question comes from line of Durgesh Chopra with Evercore ISI. Please proceed.

[Christopher C. Womack, CEO at Southern]

Good afternoon.

[Durgesh Chopra, Managing Director at Southern]

Hey, good afternoon, Chris. Thanks for - thanks for taking my question. Just first, Chris, you talked about the maintenance outage at Unit 3. I just want to confirm that's just standard process, right. That's not an added step?

[Christopher C. Womack, CEO at Southern]

Yeah, it's. Go head Durgesh.

[Durgesh Chopra, Managing Director at Southern]

No, that's it - that's it. Please go ahead.

[Christopher C. Womack, CEO at Southern]

Yeah, now, you're right. I mean it's a standard outage. I mean there are some testing equipment that has to be removed and some things that we have learned and so we will fine tune some things may be some remediation that we'll will look curve probably about a10-day maintenance outage, but yeah, I mean it's - it's - it's standard and was expected.

[Durgesh Chopra, Managing Director at Southern]

Perfect, thank you for clarifying that. And then maybe I can just pivot to the - The Georgia Power, under recovered fuel filing. I believe you made that in February, just any initial stakeholder feedback there. I know at the last call we talked about, perhaps, offsetting some of that balance with lower gas prices going-forward as we see it, just anything you can share with us on that front would be great? Thank you.

[Christopher C. Womack, CEO at Southern]

As you may - yeah as you may know, we reached the stipulation with the staff and we're looking at about a 12% price increase on retail rate over 3-year period to recover that unrecovered fuel balance and that would take effect in June and that is lower than our initial request was and 30% less than what we expected, and I think as we look at this outcome the stipulation it reflects kind of our sensitivity and our interest in and paying attention to affordability and - and recognizing that we must recover this unrecovered fuel balance by how do we do it in a manner that minimizes the impact on customers and so. That's kind of where we are more, more hearings in consideration to take place, but the rate will take effect starting in June.

[Durgesh Chopra, Managing Director at Southern]

Perfect, thanks so much.

[Christopher C. Womack, CEO at Southern]

Welcome. Thank you, Durgesh.

[Operator]

And our next question comes from Sophie Karp with KeyBanc. Please proceed.

[Sophie Karp, Managing Director at Southern]

Hi, good afternoon.

[Christopher C. Womack, CEO at Southern]

Sophie, how are you doing?

[Sophie Karp, Managing Director at Southern]

Hello.

[Christopher C. Womack, CEO at Southern]

Good afternoon, thank you. Welcome.

[Sophie Karp, Managing Director at Southern]

Thank you. Thank you. Thanks for taking my question. Most of my questions have been answered actually, let me just maybe throw this one at you guys. It was Vogtle moving towards the completion Unit 3 and Unit 4 can remain on-track to be completed in direct line of vision. Would you take some time in the medium term to have another look at the businesses that you own and maybe figure out which ones could be recycled capital wise and the optimize the business mix or are you quite happy with what you guys right now?

[Christopher C. Womack, CEO at Southern]

I mean I - I think you kind of speak to it, but as we have success on Vogtle 3 and 4, it does give us the opportunity to unlock the fuel value of this company and kind of regain our premium valuation and, I mean, we will look at our business, we'll look at all parts of it in terms of from a buyer and seller perspective and the thing about it is I say we've got - and we will always look our handover. We feel real good about the cards that we have, we will always do our homework and we look at what others have extracted in the marketplace, but we'll also look and see some things we can do better. We don't have any equity needs. I mean, we're in a very-very good spot and so I just think it's an opportunity for us to really unlock full value in the full potential of this company as we go-forward.

[Sophie Karp, Managing Director at Southern]

Well, thank you so much. That's all from me.

[Christopher C. Womack, CEO at Southern]

Thank you.

[Operator]

Our next question comes from the line of Angie Storozynski with Seaport. Please proceed.

[Christopher C. Womack, CEO at Southern]

Hi Angie. How are you?

[Angie Storozynski, Analyst at Seaport Global Securities]

Very good. So I'll ask a bit of question. So we do actually be willing to acquire some assets now that you have [Indecipherable] you have no equity needs. You have a strongly improving cash flow and there are assets available for-sale. For now, the way we look at you guys, you basically solve for roughly the - the sector average earnings growth, which I cannot believe that you would be happy with?

[Christopher C. Womack, CEO at Southern]

Angie, I have been, I will tell you now. I think I said on - on the last answer to the last question. We are excited about the progress we're making through on these Vogtle units and we're looking-forward to bring in both units online and getting those units completed. Once we do that, I mean, we're really going to focus on really making sure that we are unlocking the full potential and the full opportunities for this business that we have and we are large-enough to do this as a stand-alone. At the same time, we're continuing to always look at our look at the market lookover our hand as I said, from both a buyer and seller perspective, we'll always continue to do our homework, but we feel good about where we are. Five to seven years is good enough rust to be the best risk at a risk adjusted return in the industry and we feel good about where we are.

[Angie Storozynski, Analyst at Seaport Global Securities]

Okay, that's all I have. Thank you.

[Christopher C. Womack, CEO at Southern]

Thank you.

[Operator]

Our next question comes from line of Ashar Khan with Variation. Please proceed.

[Christopher C. Womack, CEO at Southern]

Ashar how are you today?

[Daniel S. Tucker, Executive VP & CFO at Southern]

Hi, there.

[Ashar Khan, at Southern]

Pretty good. Congratulations. My questions have been answered. Thank you.

[Christopher C. Womack, CEO at Southern]

Thank you very much. Have a good day

[Operator]

Thank you. That will conclude today's question-and-answer session. Sir, are there any closing remarks.

[Christopher C. Womack, CEO at Southern]

Guys, we thank you for being with us today and we look-forward to speaking with you in the future. But otherwise, Operator, thank you very much for the call.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Scott Gammill, VP of IR & Treasurer
• Christopher C. Womack, CEO
• Daniel S. Tucker, Executive VP & CFO

Analysts

• Steven I Fleishman, Wolfe Research
• Shahriar Pourreza, Guggenheim Partners
• Ross Fowler, UBS Group AG
• Julien Dumoulin-Smith, Bank of America Co.
• David Arcaro, Morgan Stanley
• Durgesh Chopra, Evercore ISI
• Sophie Karp, KeyBanc
• Angie Storozynski, Seaport Global Securities
• Ashar Khan, Variation