Southern Company's Q3 2025 Earnings Call: Contradictions Emerge on EPS Growth Rebase, Southern Power Contracts, Load Demand, and Equity Strategy

Date of Call: October 30, 2025

Financials Results

• EPS: $1.60 adjusted EPS for Q3 2025, $0.10 above the estimate and $0.17 higher than Q3 2024; 9M adjusted EPS $3.76 vs $3.56 for the same period in 2024; Q4 adjusted EPS estimate of $0.54, implying full-year adjusted earnings at the top of 2025 guidance ($4.30).

Guidance:

• Q4 adjusted EPS estimated at $0.54; combined with YTD results implies full-year adjusted EPS at the top of 2025 guidance ($4.30).
• Complete update to long-term plan to be provided on the February 2026 (Q4) call: refreshed 5-year capex, sales forecast, financing plans, 2026 and long-term EPS guidance; potential rebasing "as early as 2027" subject to multiple factors.
• Equity financing progress: $1.8B priced via ATM forward sales; over $7B of $9B equity need through 2029 solidified; will remain opportunistic to reach ~17% FFO/debt.
• Long-term debt financing for 2025 fully satisfied at subsidiaries.

Business Commentary:

* Strong Financial Performance: - The Southern Company reported adjusted EPS of $1.60 per share for Q3 2025, which was $0.10 above the estimate. - The growth was driven by continued investment in state-regulated utilities, customer growth, and increased usage.

• Customer and Load Growth:
• Year-to-date weather-normal retail electricity sales were 1.8% higher compared to the first three quarters of 2024, with further growth across all customer classes.

• The growth was driven by increased sales to existing and new customers, especially data centers, which were up 17%.

• Infrastructure and Expansion:

• The company has signed contracts for over 2 gigawatts of new load, with additional contracts expected to finalize in the future.

• These expansions are driven by economic development activities, which generated nearly 5,000 potential new jobs and $2.8 billion in expected capital investments.

• Equity Financing and Credit Quality:

• Southern Company has issued $4 billion in long-term debt across its subsidiaries in Q3 and has sourced $1.8 billion in equity through forward sales agreements.
• The proactive approach to equity financing is aimed at maintaining strong credit quality and meeting long-term FFO to debt targets, which is crucial for preserving investment-grade credit ratings.

Sentiment Analysis:

Overall Tone: Positive

• "Southern Company continues to perform exceptionally well." Management reported "strong adjusted earnings results...meaningfully above the estimate" and said they are "extraordinarily well positioned to finish the year strong" with a "bright future ahead." These statements, plus execution on financing and sizable contracted/committed large-load pipeline, support a positive tone.

Q&A:

• Question from Carly Davenport (Goldman Sachs Group, Inc., Research Division): Maybe to start just on the kind of load growth outlook in Georgia, I guess, as you continue to lock in contracts under the new tariff structure there, can you talk a little bit about the reception from customers to the new structure and also how you approach the minimum bill components and ensure cost recovery from investments to support that load?
  Response: Customers understand and accept the new Georgia rules; contracts include customer protections and minimum bills that cover fixed costs, with benefits accruing as loads ramp.

• Question from Carly Davenport (Goldman Sachs Group, Inc., Research Division): With the upcoming certifications and potential for incremental generation needs, how are you thinking about potential impacts from the PSC election and those processes as you think about the longer-term plan?
  Response: Georgia Power's updated load forecast supports the full 10 GW request; the certification process is ongoing with intervenor testimony forthcoming and a commission ruling expected around December 19.

• Question from Julien Dumoulin-Smith (Jefferies LLC, Research Division): Can we talk about the rebasing? You use the same language again about as early as '27. What metrics are you looking at (operational, regulatory, incremental signed deals) to get comfortable to make a firmer timeline?
  Response: There is no single trigger—rebasing depends on multiple factors (economy, interest rates, large-load contracts); management will provide more clarity on the February call.

• Question from Julien Dumoulin-Smith (Jefferies LLC, Research Division): On the $9 billion equity need, if you were to get this incremental $5 billion, how do you think about that being reflected in the $9 billion?
  Response: The Georgia PSC upside is about $4B of incremental capital likely financed ~40% with equity; about $1B relates to FERC-regulated gas opportunities, which together explain the ~$5B.

• Question from Shahriar Pourreza (Wells Fargo Securities, LLC, Research Division): On Southern Power, how should we think about asset values and the pricing environment as existing tolling agreements expire—are there opportunities to renegotiate tolls ahead of expirations?
  Response: About 95% of Southern Power's assets are under long-term contracts through 2029; as contracts expire there will be opportunities to renegotiate/renew and recent competitive PPAs repriced roughly 2–3x indicate upside potential.

• Question from Shahriar Pourreza (Wells Fargo Securities, LLC, Research Division): Any thoughts on timing for the Southern Natural Gas (SNG) pipeline expansion and talks with counterparties?
  Response: The SNG expansion is on track; it's a ~$3B project (company is 50% owner) and management expects strong interest in contracting capacity.

• Question from Shahriar Pourreza (Wells Fargo Securities, LLC, Research Division): Have you considered other avenues besides equity/equity-like instruments—e.g., partial asset sales or Southern Power transactions?
  Response: Management won't discuss speculative transactions but says they continually evaluate who is the best owner of assets and will consider options when appropriate; premature to comment further.

• Question from Anthony Crowdell (Mizuho Securities USA LLC, Research Division): On the Q4 call you'll give a capital refresh and potentially EPS CAGR; will you also provide 2027 guidance on the fourth quarter call?
  Response: They expect to share increased clarity in February (Q4 call) as contracts and other factors evolve, but timing/details remain subject to those dynamics.

• Question from Anthony Crowdell (Mizuho Securities USA LLC, Research Division): Does Moody's placing the holding company on negative outlook change the view of pulling forward the remaining $2B of equity?
  Response: No change—management remains on a disciplined path to reach ~17% FFO/debt, sees progress on equity issuances, and will continue engaging rating agencies.

• Question from Jeremy Tonet (JPMorgan Chase & Co, Research Division): Any specific federal actions or entities that would make expanding Vogtle or pursuing SMRs more attractive to Southern?
  Response: Recent federal actions (industry collaborations and executive orders) are supportive and important for new nuclear development, but no change in immediate appetite.

• Question from Andrew Weisel (Scotiabank Global Banking and Markets, Research Division): Does all of that federal government activity change your appetite for new nuclear?
  Response: Not at this time.

• Question from Andrew Weisel (Scotiabank Global Banking and Markets, Research Division): On Slide 9 the change between 2029 contracted/committed and mid-2030s is small—how much is ramping of the same projects vs incremental projects, and how much is conservatism/risk-adjusting?
  Response: The 2030s column includes the 2029 7 GW; the small delta mainly reflects ramp-up timing (typically ~5 years per contract) and conservative risk adjustments tailored per contract rather than new large incremental projects.

• Question from David Arcaro (Morgan Stanley, Research Division): Is there further opportunity to add more gigawatts by 2029 or are there system constraints limiting additional data centers in the near term?
  Response: Yes—there is additional capacity and upside; management is in advanced discussions with other large-load customers and sees more opportunity through the latter part of the decade.

• Question from David Arcaro (Morgan Stanley, Research Division): Can you characterize timing for the next set of RFPs and when new generation would come into service?
  Response: The 2025 IRP allows an all-source RFP as early as 2026; potential resource needs could come into service in the early 2030s (around 2032), with more clarity next year.

• Question from Agnieszka Storozynski (Seaport Research Partners): On contract-based gas-fired new builds for Southern Power, have you seen offers that meet your return expectations for long-term deals?
  Response: Southern Power continues to evaluate opportunities; they maintain a high filter (credit quality, long-term, limited fuel risk) and have ongoing conversations but no committed deals yet.

• Question from Agnieszka Storozynski (Seaport Research Partners): On potential new nuclear announcements in the Southeast—are discussions preliminary or should we brace for announcements?
  Response: Discussions are preliminary; Southern Company is not in position to announce new nuclear until risks are mitigated and appropriate safeguards are in place.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc., Research Division): What's the distinction between 'contracted' and 'committed'?
  Response: 'Contracted' = signed, binding agreement; 'committed' = advanced-stage negotiations (RFS, collateral, engineering studies) that are near signing but not yet executed.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc., Research Division): How many gigawatts are in advanced-stage negotiations?
  Response: Approximately 12 GW are in the advanced-stage (committed) bucket, though the figure is dynamic.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc., Research Division): You're targeting 8% sales growth—what year do you expect to achieve that level?
  Response: The 8% sales growth target is expected in the latter part of the planning horizon, around 2029.

• Question from Travis Miller (Morningstar Inc., Research Division): Based on your project breakdown, are average projects ~300–500 MW and how do the next-stage (50+ GW) projects look?
  Response: Project sizes vary widely (some ~100 MW, some north of 1 GW); the larger pipeline (>50 GW) is heavily discounted through the contracting process and includes a wide range of project sizes.

• Question from Travis Miller (Morningstar Inc., Research Division): Are most projects greenfield or brownfield—expansions versus new builds?
  Response: Both—the mix includes expansions of existing industrial/data-center customers and greenfield relocations or new facilities.

Contradiction Point 1

EPS Growth Rate Rebase

It involves changes in the expected earnings per share (EPS) growth rate, which is a critical metric for investors to evaluate the company's financial health and growth prospects.

Can you detail the rebasing of the EPS growth rate and the metrics you're using? - Julien Patrick Dumoulin-Smith (Jefferies)

2025Q3: There's no specific decision metric; it involves a broad range of factors like economic conditions, interest rates, and contract progress. We'll provide more clarity in February on potential changes to the EPS growth trajectory. - Christopher Womack(CEO, President & Chairman)

Does the capital plan update and rate base growth increase to 8% through 2029 affect the 2027 rebasing timeline? - Carly S. Davenport (Goldman Sachs)

2025Q2: We will continue with our normal cadence of doing annual updates, addressing all in the fourth quarter. The rate base growth to 8% reflects our confidence in seeing an increasingly strong pipeline of large load customers, which is growing, and we're attracting many of them. However, we need to see sustainability over the long term before revisiting the 5% to 7% growth rate. - David P. Poroch (Executive VP & CFO)

Contradiction Point 2

Southern Power Contract Renewal Discussions

It pertains to the company's strategy and progress in renewable energy projects, which impact its ability to meet sustainability goals and revenue projections.

Have there been discussions to renegotiate Southern Power's tolls and explore new projects? - Shahriar Pourreza (Wells Fargo Securities, LLC, Research Division)

2025Q3: We're in conversations to renew contracts where appropriate, especially as they approach expiration. Southern Power recently won contracts at competitive rates, nearly 3x current levels, indicating potential opportunities. - David Poroch(Executive VP & CFO)

What other factors affect rate base versus earnings translation, and is there any update on Southern Power's repowering? - Julien Patrick Dumoulin-Smith (Jefferies)

2025Q2: We're being aggressive in our market conversations, and opportunities are ripe in the early 2030s for Southern Power's contracts to reprice. We don't placeholders in our capital plan but evaluate based on strict risk-return parameters. - David P. Poroch (Executive VP & CFO)

Contradiction Point 3

Load Demand and Pipeline Dynamics

It involves differing perspectives on the load demand and pipeline dynamics, which are crucial for understanding the company's growth trajectory and capacity planning.

What portion of the 2029 load demand increase is attributed to ramp-ups versus new projects, and is the projection conservative? - Andrew Weisel (Scotiabank Global Banking and Markets, Research Division)

2025Q3: We now expect that the load demand will increase by about 3 gigawatts in Georgia by 2029, reflecting ramping incremental contracts through 2029. - David Poroch(CFO)

Can you provide an update on the Georgia Power load pipeline, including size, contracted, and committed loads, and any changes in data center customer tone? - Carly Davenport (Goldman Sachs)

2025Q1: We also have our Georgia load pipeline, which is approximately 52 gigawatts, there are about 4 gigawatts that are contracted and about 8 gigawatts that are committed. ... - Dan Tucker(CFO)

Contradiction Point 4

Equity Issuance Strategy

It involves differing approaches to equity issuance, which is crucial for financial planning and maintaining the company's credit quality.

Does Moody's negative outlook impact equity issuance timing? - Anthony Crowdell (Mizuho Securities USA LLC, Research Division)

2025Q3: We're committed to maintaining credit quality and FFO to debt ratios, aiming for 17%. Our proactive approach to equity issuances remains disciplined, and we'll continue to communicate with rating agencies. - David Poroch(CFO)

How will you achieve the 17% FFO-to-debt ratio as you reevaluate your EPS commitments? - Julien Dumoulin-Smith (Jefferies LLC)

2025Q1: We expect to have line of sight on reaching the target, but not by 2027. Significant factors affecting timing include regulatory asset roll-off and potential capital deployments. - Dan Tucker(CFO)