Southern (NYSE:SO) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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View the webcast at https://events.q4inc.com/attendee/395018905
Summary
Southern reported adjusted earnings for the first quarter of 2026 above estimates, with significant year-over-year growth across its businesses.
The company signed contracts for 1.9 gigawatts of customer load, bringing the total to over 11 gigawatts, focusing on high credit quality hyperscalers.
Southern announced $26.5 billion in loan agreements with the Department of Energy, expected to save $7 billion over 30 years.
Adjusted EPS for Q1 2026 was $1.32, $0.12 above estimates, driven by customer growth and increased usage, notably from data centers.
The company initiated an all-source RFP to procure 2-6 gigawatts of new generation resources projected for 2032-2033.
Southern Power plans to add 400 megawatts of capacity upgrades, with potential for an additional 300 megawatts, adding $700 million to the capital plan.
The Board approved an $0.08 increase in the annual dividend, marking 25 consecutive annual increases.
Management emphasized the importance of rate stability and customer benefits from growth through strategically structured contracts.
Full Transcript
Christine (Conference Operator)
Good afternoon, My name is Christine and I’ll be your conference operator today. At this time I would like to welcome everyone to the Southern Company first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Greg McLeod, Director of Investor Relations. Please go ahead sir.
Greg McLeod (Director of Investor Relations)
Thank you. Christine, good afternoon and welcome to Southern Company’s first quarter 2026 earnings call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company and David Perroch, Chief Financial Officer. Let me remind you that we will make 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 10K, Form 10Q and subsequent securities 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’ll turn the call over to Chris. Thank you Greg Good afternoon and thank you for joining us today. As you can see from the materials that we released this morning, we reported adjusted earnings results the first quarter above our estimate with year over year growth reflected across all our major businesses. That performance reflects premium execution and the strength of our strategy to serve the phenomenal growth we’re seeing across the Southeast with reliable and affordable energy while delivering durable long term value for shareholders. We continue to see extraordinary growth and economic development opportunities as our service territories attract investment people and jobs at a pace few regions can match. As we previously highlighted, a substantial portion of this growth is driven by projected demand from large load customers. The demand for power across our electric service territories has culminated in 23 gigawatts of contracted or late stage load in just the last two months. We assigned contracts for another 1.9 gigawatts of customer load with high credit quality hyperscalers bringing our fully contracted large load agreements to more than 11 gigawatts across our electric subsidiaries. These bilateral negotiated agreements are structured so that customers driving incremental demand cover the full share of the cost to serve them, helping to assure this growth benefits all customers. We continue to execute on our plans to serve growth and our straightforward approach protects existing customers. We invest in line with demand to serve growth that enables us to deliver regular, predictable and sustainable results while providing meaningful benefits to the customers and communities we are privileged to serve. Southern Company continues to be uniquely positioned to do this because of our scale, our experience and our expertise, all supported by constructive, long standing regulatory frameworks. At Southern Company we are capitalizing on transformative growth opportunities while delivering energy reliability and rate stability as energy demands. Growth with base rates held stable in Alabama and Georgia until at least 2010 and 2029, along with the recent filing to lower rates in Georgia associated with the recovery of fuel and storm costs, we are demonstrating the value of this approach. Rate stability for our customers is a purposeful objective supported by our constructive, orderly planning and procurement processes, cost management and thoughtful financing. This same built for purpose approach also creates the potential for additional capital investment to serve incremental growth opportunities under established regulatory processes. We have routinely demonstrated as growth opportunities present themselves that Southern Company has the ability to convert these opportunities into value through enhanced operations and grid improving infrastructure investments for the benefit of customers and investors alike. The construction of many of these investments is well underway. In the last two months, Georgia Power achieved commercial operations for two battery energy storage systems providing nearly 200 megawatts of capacity, representing an important step forward in advancing reliable, sustainable energy solutions across the state. These projects are the first of several resources included within our 10 gigawatt portfolio of approved new generation resources that are in development to power the extraordinary productive growth in our region, including multiple battery systems and natural gas combustion turbines that are projected to be online later in 2026 and 2027.. Before I turn the call over to David for our financial update, I’d like to highlight the recently announced historic $26.5 billion in loan agreements with the Department of Energy that will benefit customers across Alabama and Georgia for decades as we expect these loans to translate into meaningful long term customer savings while reducing pressure on our capital market needs. Over the approximately 30 year term of the Department of Energy loans, this lower cost financing is projected to generate cumulative savings of $7 billion for customers. David, I’ll now turn the call over to you for a financial update.
David Perroch (Chief Financial Officer)
Thanks Chris and good afternoon everyone. For the first quarter of 2026, our adjusted EPS was $1.32 per share, $0.09 higher than the first quarter of 2025 and $0.12 above our estimate. The primary drivers of our performance for the quarter compared to last year were meaningful customer growth and increased usage, including from data centers. at our state-regulated electric utilities. Additionally, increased revenues in our gas utilities and higher energy related revenues in our unregulated businesses including Southern Power were positive drivers in the first quarter. This was partially offset by higher financing costs and milder weather year over year compared to the first quarter of 2025. A complete reconciliation of year over year earnings is included in the materials we released this morning. Our adjusted EPS estimate for the second quarter is $1 per share. Turning now to retail electricity sales first quarter weather normal retail electricity sales to all classes were 2.3% higher than the first quarter of 2025. This represents the highest total retail sales growth that we’ve seen the first quarter in recent history. In fact, sales to all three customer classes were up year over year, including residential where we saw 46,000 new customers added to our system as positive trends and net migration continue. The commercial class grew 4.5% in the first quarter when adjusted for weather, bolstered by ongoing growth in data centers.. Data center usage saw material expansion in the quarter up 42% year over year, primarily due to accelerating usage ramps at large load facilities. Our industrial sales grew 1.5% with particular strength in several segments, including robust activity at multiple steel manufacturers in Alabama. More broadly, the Southeast continues to stand out as one of the most attractive economic regions in the country, driven by a diverse mix of advanced manufacturing technology and other energy intensive industries. In the first quarter alone, there were economic development announcements for over $7 billion of capital investment and the creation of nearly 4,000 permanent jobs in our region, including a global biopharmaceutical manufacturing project north of Atlanta bringing $2 billion of investment and over 300 jobs to Georgia. The sustained higher high quality growth reinforces why demand in this region of remains strong and visible, underscoring the region’s tremendous opportunity for future growth. Outside the Southeast, we continue to see momentum in our gas utilities, including a recently announced Hyundai investment in Illinois that is expected to bring 2,500 jobs and $500 million of investment to the Nicor Gas service territory. As we look ahead, the interest from large load customers in our electric service territories, which includes data centers. and large manufacturers, remains strong with a prospective pipeline of well over 75 gigawatts. And we continue to make incredible progress advancing projects through stages in our large load process to finality with executed contracts. As Chris mentioned, over the past two months Georgia Power signed two projects representing 1.9 gigawatts, pushing the cumulative amount of contracted large loads to over 11 gigawatts across Alabama, Georgia and Mississippi. These bilaterally negotiated contracts with pricing and terms designed to both protect and benefit existing customers also support our long term financial outlook. We continue to see incredible momentum and tangible interest for power from large load customers and are in active late stage discussions for another 12 gigawatts of contracted load through the mid-2030s, an increase of 2 gigawatts from what we shared last quarter. Importantly, roughly 6 gigawatts or half of these late stage gigawatts are expected to be finalized with executed contracts in the near term. In a little over two months we’ve seen projects representing 12 gigawatts advance to the next stage in our large load process. The demonstrated progress we are making in attracting and signing new agreements with large load customers is exciting and continues to drive projected growth in our risk adjusted load forecast which ultimately helps inform future generation needs and generation requests for proposals or RFPs across our service territory. For example, Georgia Power recently initiated the regulatory process for an all source RFP to procure 2 to 6 gigawatts of new dispatchable generation resources including from thermal generation, battery energy storage and renewables that are projected to be in service in 2032 and 2033. Generation procurement through RFPs delivers substantial value to customers and is a testament to the transparent and orderly processes in our vertically integrated state-regulated markets with long range integrated resource planning. To the extent that company owned resources are selected through Alabama Power and Georgia Power’s active RFP processes and ultimately authorized by their respective Public Service Commission (PSC), these generation investments would represent substantial incremental investment above our current base capital plan. Turning to Southern Power, we are moving Forward to add 400 megawatts of additional capacity upgrades through natural gas turbine upgrades and multiple existing facilities in Alabama and Georgia with commercial operation projected between 2029 and 2031. This incremental investment is projected to add approximately $700 million to our capital plan over the next several years. We continue to evaluate other growth investment opportunities at Southern Power, including an additional 300 megawatts of natural gas up rates as well as other new generation opportunities in both the Southeast and other markets to meet future demand. Before I turn the call back over to Chris, I’d like to provide an update on our financing activities through the first quarter. We continue to proactively address equity needs that support our strong credit quality and path towards 17% FFO to debt by 2029. Over the last quarter we sourced an incremental $500 million of equity through our at the Market or ATM program with forward contracts that settle at our discretion by 2028, combined with the significant amount of equity previously sourced and including the incremental 700 megawatts of Southern. I’m sorry, $700 million of Southern power projected capital expenditures I mentioned earlier. We project a remaining need for equity or equity equivalents of approximately $1.8 billion through 2030 in support of our capital plan and long term credit objectives. We are well positioned to continue financing our remaining equity needs in a credit supportive and shareholder focused fashion. I’ll now turn the call back over to Chris.
Chris Womack (Chairman, President and Chief Executive Officer)
Thank you, David. Last week the Southern Company Board of Directors approved an increase of $0.08 per share in our annual common dividend, raising the annualized rate to $3.04 per share. This action marks our 25th consecutive annual increase and this will now be 79 consecutive years. Dating back to 1948. Southern Company has paid a dividend that is equal to or greater than the previous year. Increasing dividend 25 years in a row represents a historic milestone for the company and underscores our focus on premium risk-adjusted total shareholder return, and our goal of delivering regular, predictable and sustainable value for our shareholders. We are incredibly proud of our strong dividend track record which continues to be an integral part of Southern Company’s long term value proposition. As we conclude our discussion today, our first quarter results reinforce a simple point our company is delivering. We’re off to a strong start in 2026 and that momentum gives us confidence as we continue executing on our long term goals. We’re capturing growth, protecting customers and creating long term value. And we’re doing it in a disciplined, predictable way. With that foundation, we have a bright future ahead. Thank you for joining us this afternoon and for your continued interest in Southern Company Operator. We are now ready to take questions.
OPERATOR
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question comes from the line of Char Parizo with Wells Fargo. Please proceed with your question.
Char Parizo (Equity Analyst)
Hey Char. Hey guys. Hey guys. Hey Chris. All right, not too bad. Hope you’re doing well. Good. Good for you. Because just on New Nuclear there seems to be sort of a consortium that’s formed with utilities and hyperscalers, maybe with some backstop by US government around sort of new AP1000s. And it seems like there could be some views that hyperscalers would be willing to take on some of the cost inflation above budgeted amounts. One of your peers kind of highlighted that they wouldn’t be surprised if the first deal was announced this year. Can you maybe comment on your views? Is Southern interested? Are you in the consortium? Just, I guess, some thoughts on new nuclear in light of the learning curves of Unit three versus Unit four. Thanks.
Chris Womack (Chairman, President and Chief Executive Officer)
Yeah, sure. I mean, a very, very good question. And let me at the outset say I am very excited to see all the actions that the current administration has taken to support the build and construction of new nuclear. I mean, I’ve said it, you heard me say it many times. With the growth that we see in this country, I think it’s going to be important that we have make available new nuclear in this country to help and support and meet this demand. The current administration, I think, is taking some wonderful steps on the regulatory front. All the conversations that DOE is leading and having today about long lead times for supply chains, all of these issues are matters that we clearly have to address …
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