Southern Company reports third-quarter 2020 earnings

October 29, 2020

By Southern Company

Caption FF

Description FF

ATLANTA, Oct. 29, 2020 /PRNewswire/ — Southern Company today reported third-quarter 2020 earnings of $1.25 billion, or $1.18 per share, compared with $1.32 billion, or $1.26 per share, in the third quarter of 2019. For the nine months ended September 30, 2020, Southern Company reported earnings of $2.73 billion, or $2.58 per share, compared with earnings of $4.30 billion, or $4.12 per share, for the same period in 2019.

Excluding the items described in the “Net Income – Excluding Items” table below, Southern Company earned $1.29 billion, or $1.22 per share, during the third quarter of 2020, compared with $1.40 billion, or $1.34 per share, during the third quarter of 2019. For the nine months ended September 30, 2020, excluding these items, Southern Company earned $2.94 billion, or $2.78 per share, compared with $2.97 billion, or $2.84 per share, for the same period in 2019.

Non-GAAP Financial Measures	Three Months Ended September		Year-to-Date September
Net Income – Excluding Items (in millions)	2020	2019	2020	2019
Net Income – As Reported	$1,251	$1,316	$2,732	$4,298
Less:
Acquisition and Disposition Impacts	–	(5)	38	2,477
Tax Impact	–	(7)	(16)	(1,130)
Estimated Loss on Plants Under Construction	3	(3)	(151)	(16)
Tax Impact	(1)	1	39	4
Wholesale Gas Services	(62)	(14)	(61)	79
Tax Impact	17	5	16	(18)
Asset Impairment	–	(92)	(154)	(92)
Tax Impact	–	27	80	27
Net Income – Excluding Items	$1,294	$1,404	$2,941	$2,967
Average Shares Outstanding – (in millions)	1,058	1,048	1,058	1,043
Basic Earnings Per Share – Excluding Items	$1.22	$1.34	$2.78	$2.84

NOTE: For more information regarding these non-GAAP adjustments, see the footnotes accompanying the Financial Highlights page of the earnings package.

Earnings drivers year-over-year for the third quarter 2020 were negatively impacted by a decline in sales related to the COVID-19 pandemic and milder weather, largely offset by diligent cost control and constructive state regulatory actions completed in 2019 at the company’s utilities.

“During the third quarter and much of this year, unprecedented circumstances, including the COVID-19 pandemic and an exceptionally active storm season, have confronted our customers and communities. Employees throughout the Southern Company system have responded by continuing to deliver industry-leading reliability and service to those customers we are privileged to serve,” said Chairman, President and CEO Thomas A. Fanning. “Our priorities moving forward include maintaining best-in-class service levels and cost discipline at our utilities while continuing to work diligently to bring Vogtle Units 3 and 4 online by the November 2021 and November 2022 regulatory-approved in-service dates.”

Third-quarter 2020 operating revenues were $5.6 billion, compared with $6.0 billion for the third quarter of 2019, a decrease of 6.3 percent. For the nine months ended September 30, 2020, operating revenues were $15.3 billion, compared with $16.5 billion for the corresponding period in 2019, a decrease of 7.6 percent. These decreases were primarily due to lower fuel costs and a sales decline resulting from milder weather and COVID-19.

Southern Company’s third-quarter earnings slides with supplemental financial information are available at http://investor.southerncompany.com.

Southern Company’s financial analyst call will begin at 1 p.m. Eastern Time today, during which Fanning and Chief Financial Officer Andrew W. Evans will discuss earnings and provide a general business update. Investors, media and the public may listen to a live webcast of the call and view associated slides at http://investor.southerncompany.com/webcasts. A replay of the webcast will be available on the site for 12 months.

About Southern Company
Southern Company (NYSE: SO) is a leading energy company serving 9 million customers through its subsidiaries. The company provides clean, safe, reliable and affordable energy through electric operating companies in three states, natural gas distribution companies in four states, a competitive generation company serving wholesale customers across America, a leading distributed energy infrastructure company, a fiber optics network and telecommunications services. Southern Company brands are known for excellent customer service, high reliability and affordable prices below the national average. For more than a century, we have been building the future of energy and developing the full portfolio of energy resources, including carbon-free nuclear, advanced carbon capture technologies, natural gas, renewables, energy efficiency and storage technology. Through an industry-leading commitment to innovation and a low-carbon future, Southern Company and its subsidiaries develop the customized energy solutions our customers and communities require to drive growth and prosperity. Our uncompromising values ensure we put the needs of those we serve at the center of everything we do and govern our business to the benefit of our world. Our corporate culture and hiring practices have been recognized nationally by the U.S. Department of Defense, G.I. Jobs magazine, DiversityInc, Black Enterprise, Fortune’s “World’s Most Admired Companies” list, Forbes and the Women’s Choice Award. To learn more, visit www.southerncompany.com. To learn more, visit www.southerncompany.com.

Southern Company
Financial Highlights
*(In Millions of Dollars Except Earnings Per Share)*

	Three Months Ended September				Year-to-Date September
Net Income–As Reported (See Notes)	2020		2019		2020		2019
Traditional Electric Operating Companies	$	1,284	$	1,373	$	2,571	$	2,719
Southern Power	74		86		212		316
Southern Company Gas	14		(29)		360		347
Total	1,372		1,430		3,143		3,382
Parent Company and Other	(121)		(114)		(411)		916
Net Income–As Reported	$	1,251	$	1,316	$	2,732	$	4,298

Basic Earnings Per Share¹	$	1.18	$	1.26	$	2.58	$	4.12
Average Shares Outstanding (in millions)	1,058		1,048		1,058		1,043
End of Period Shares Outstanding (in millions)					1,056		1,049

Non-GAAP Financial Measures	Three Months Ended September				Year-to-Date September
Net Income–Excluding Items (See Notes)	2020		2019		2020		2019
Net Income–As Reported	$	1,251	$	1,316	$	2,732	$	4,298
Less:
Acquisition and Disposition Impacts²	—		(5)		38		2,477
Tax Impact	—		(7)		(16)		(1,130)
Estimated Loss on Plants Under Construction³	3		(3)		(151)		(16)
Tax Impact	(1)		1		39		4
Wholesale Gas Services⁴	(62)		(14)		(61)		79
Tax Impact	17		5		16		(18)
Asset Impairment⁵	—		(92)		(154)		(92)
Tax Impact	—		27		80		27
Net Income–Excluding Items	$	1,294	$	1,404	$	2,941	$	2,967

Basic Earnings Per Share–Excluding Items	$	1.22	$	1.34	$	2.78	$	2.84
-See Notes on the following page.

Southern Company
Financial Highlights

Notes
(1)	For the three and nine months ended September 30, 2020 and 2019, dilution does not change basic earnings per share by more than $0.03 and is not material. Diluted earnings per share was $1.18 and $2.57 in the third quarter and year-to-date 2020, respectively, and $1.25 and $4.09 in the third quarter and year-to-date 2019, respectively.
(2)	Earnings for the nine months ended September 30, 2020 primarily include a $39 million pre-tax ($23 million after-tax) gain on the sale of Southern Power Company’s Plant Mankato. Earnings for the three months ended September 30, 2019 include an $18 million pre-tax and after-tax impairment charge in contemplation of the sale of PowerSecure, Inc.’s lighting business, partially offset by $13 million pre tax ($6 million after tax) of other acquisition and disposition impacts. Earnings for the nine months ended September 30, 2019 include a $2.5 billion pre-tax ($1.3 billion after-tax) gain on the sale of Gulf Power Company, a $23 million pre-tax ($88 million after-tax) gain on the sale of Southern Power Company’s Plant Nacogdoches, and $17 million pre tax ($7 million after tax) of other acquisition and disposition impacts, partially offset by pre-tax and after-tax impairment charges totaling $50 million related to the sale and contemplated sale of PowerSecure, Inc.’s utility infrastructure services and lighting businesses, respectively.
(3)	Earnings for the three and nine months ended September 30, 2020 and 2019 include charges (net of salvage proceeds), associated legal expenses (net of insurance recoveries), and tax impacts related to Mississippi Power Company’s integrated coal gasification combined cycle facility project in Kemper County, Mississippi. Earnings for the nine months ended September 30, 2020 also include a $149 million pre-tax ($111 million after-tax) charge for an estimated probable loss on Georgia Power Company’s construction of Plant Vogtle Units 3 and 4, which significantly impacted earnings and earnings per share. Mississippi Power Company expects to substantially complete mine reclamation activities in 2020 and dismantlement of the abandoned gasifier-related assets and site restoration activities in 2025. The additional pre-tax period costs associated with these activities, including related costs for compliance and safety, asset retirement obligation accretion, and property taxes, are estimated to total $3 million for the remainder of 2020 and $10 million to $15 million annually for 2021 through 2025. Further charges for Georgia Power Company’s construction of Plant Vogtle Units 3 and 4 may occur; however, the amount and timing of any such charges are uncertain.
(4)	Earnings for the three and nine months ended September 30, 2020 and 2019 include Wholesale Gas Services business results. Presenting earnings and earnings per share excluding Wholesale Gas Services provides an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.
(5)	Earnings for the nine months ended September 30, 2020 include a pre-tax impairment charge of $154 million ($74 million after tax) related to a leveraged lease. Earnings for the three and nine months ended September 30, 2019 include a pre-tax impairment charge of $92 million ($65 million after tax) associated with Southern Company Gas’ natural gas storage facility in Louisiana. Further charges associated with this facility are not expected. Southern Company Gas has two other natural gas storage facilities which could be impacted by ongoing U.S. natural gas storage market changes that may imply impacts to future rates and/or asset values, and, if sustained, could trigger impairment.

Southern Company

Significant Factors Impacting EPS

Three Months Ended
September

Year-to-Date
September

2020

2019

Change

2020

2019

Change

Earnings Per Share–

As Reported¹(See Notes)

1.18

1.26

(0.08)

2.58

4.12

(1.54)

Significant Factors:

Traditional Electric Operating Companies

(0.09)

(0.14)

Southern Power

(0.01)

(0.10)

Southern Company Gas

0.04

0.01

Parent Company and Other

(0.01)

(1.28)

Increase in Shares

(0.01)

(0.03)

Total–As Reported

(0.08)

(1.54)

Three Months Ended
September

Year-to-Date
September

Non-GAAP Financial Measures

2020

2019

Change

2020

2019

Change

Earnings Per Share–

Excluding Items (See Notes)

1.22

1.34

(0.12)

2.78

2.84

(0.06)

Total–As Reported

(0.08)

(1.54)

Less:

Acquisition and Disposition Impacts²

0.01

(1.27)

Estimated Loss on Plants Under Construction³

—

(0.10)

Wholesale Gas Services⁴

(0.03)

(0.10)

Asset Impairment⁵

0.06

(0.01)

Total–Excluding Items

(0.12)

(0.06)

– See Notes on the following page.

Southern Company
Significant Factors Impacting EPS

Notes
(1)	For the three and nine months ended September 30, 2020 and 2019, dilution does not change basic earnings per share by more than $0.03 and is not material. Diluted earnings per share was $1.18 and $2.57 in the third quarter and year-to-date 2020, respectively, and $1.25 and $4.09 in the third quarter and year-to-date 2019, respectively.
(2)	Earnings for the nine months ended September 30, 2020 primarily include a $39 million pre-tax ($23 million after-tax) gain on the sale of Southern Power Company’s Plant Mankato. Earnings for the three months ended September 30, 2019 include an $18 million pre-tax and after-tax impairment charge in contemplation of the sale of PowerSecure, Inc.’s lighting business, partially offset by $13 million pre tax ($6 million after tax) of other acquisition and disposition impacts. Earnings for the nine months ended September 30, 2019 include a $2.5 billion pre-tax ($1.3 billion after-tax) gain on the sale of Gulf Power Company, a $23 million pre-tax ($88 million after-tax) gain on the sale of Southern Power Company’s Plant Nacogdoches, and $17 million pre tax ($7 million after tax) of other acquisition and disposition impacts, partially offset by pre-tax and after-tax impairment charges totaling $50 million related to the sale and contemplated sale of PowerSecure, Inc.’s utility infrastructure services and lighting businesses, respectively.
(3)	Earnings for the three and nine months ended September 30, 2020 and 2019 include charges (net of salvage proceeds), associated legal expenses (net of insurance recoveries), and tax impacts related to Mississippi Power Company’s integrated coal gasification combined cycle facility project in Kemper County, Mississippi. Earnings for the nine months ended September 30, 2020 also include a $149 million pre-tax ($111 million after-tax) charge for an estimated probable loss on Georgia Power Company’s construction of Plant Vogtle Units 3 and 4, which significantly impacted earnings and earnings per share. Mississippi Power Company expects to substantially complete mine reclamation activities in 2020 and dismantlement of the abandoned gasifier-related assets and site restoration activities in 2025. The additional pre-tax period costs associated with these activities, including related costs for compliance and safety, asset retirement obligation accretion, and property taxes, are estimated to total $3 million for the remainder of 2020 and $10 million to $15 million annually for 2021 through 2025. Further charges for Georgia Power Company’s construction of Plant Vogtle Units 3 and 4 may occur; however, the amount and timing of any such charges are uncertain.
(4)	Earnings for the three and nine months ended September 30, 2020 and 2019 include Wholesale Gas Services business results. Presenting earnings and earnings per share excluding Wholesale Gas Services provides an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.
(5)	Earnings for the nine months ended September 30, 2020 include a pre-tax impairment charge of $154 million ($74 million after tax) related to a leveraged lease. Earnings for the three and nine months ended September 30, 2019 include a pre-tax impairment charge of $92 million ($65 million after tax) associated with Southern Company Gas’ natural gas storage facility in Louisiana. Further charges associated with this facility are not expected. Southern Company Gas has two other natural gas storage facilities which could be impacted by ongoing U.S. natural gas storage market changes that may imply impacts to future rates and/or asset values, and, if sustained, could trigger impairment.

Southern Company
EPS Earnings Analysis

Description	Three Months Ended September 2020 vs. 2019	Year-to-Date September 2020 vs. 2019

Retail Sales	$(0.04)	$(0.12)

Retail Revenue Impacts	0.04	0.24

Weather	(0.10)	(0.21)

Non-Fuel O&M	—	0.06

Depreciation and Amortization, Interest Expense, Other	(0.04)	(0.16)

Income Taxes	0.05	0.15

Total Traditional Electric Operating Companies	$(0.09)	$(0.04)

Southern Power	(0.01)	(0.02)

Southern Company Gas	0.01	0.05

Parent and Other	(0.02)	(0.01)

Increase in Shares	(0.01)	(0.04)

Total Change in EPS (Excluding Items)	$(0.12)	$(0.06)

Acquisition and Disposition Impacts¹	0.01	(1.27)

Estimated Loss on Plants Under Construction²	—	(0.10)

Wholesale Gas Services³	(0.03)	(0.10)

Asset Impairment⁴	0.06	(0.01)

Total Change in EPS (As Reported)	$(0.08)	$(1.54)
– See Notes on the following page.

Southern Company
EPS Earnings Analysis

Notes
(1)	Earnings for the nine months ended September 30, 2020 primarily include a $39 million pre-tax ($23 million after-tax) gain on the sale of Southern Power Company’s Plant Mankato. Earnings for the three months ended September 30, 2019 include an $18 million pre-tax and after-tax impairment charge in contemplation of the sale of PowerSecure, Inc.’s lighting business, partially offset by $13 million pre tax ($6 million after tax) of other acquisition and disposition impacts. Earnings for the nine months ended September 30, 2019 include a $2.5 billion pre-tax ($1.3 billion after-tax) gain on the sale of Gulf Power Company, a $23 million pre-tax ($88 million after-tax) gain on the sale of Southern Power Company’s Plant Nacogdoches, and $17 million pre tax ($7 million after tax) of other acquisition and disposition impacts, partially offset by pre-tax and after-tax impairment charges totaling $50 million related to the sale and contemplated sale of PowerSecure, Inc.’s utility infrastructure services and lighting businesses, respectively.
(2)	Earnings for the three and nine months ended September 30, 2020 and 2019 include charges (net of salvage proceeds), associated legal expenses (net of insurance recoveries), and tax impacts related to Mississippi Power Company’s integrated coal gasification combined cycle facility project in Kemper County, Mississippi. Earnings for the nine months ended September 30, 2020 also include a $149 million pre-tax ($111 million after-tax) charge for an estimated probable loss on Georgia Power Company’s construction of Plant Vogtle Units 3 and 4, which significantly impacted earnings and earnings per share. Mississippi Power Company expects to substantially complete mine reclamation activities in 2020 and dismantlement of the abandoned gasifier-related assets and site restoration activities in 2025. The additional pre-tax period costs associated with these activities, including related costs for compliance and safety, asset retirement obligation accretion, and property taxes, are estimated to total $3 million for the remainder of 2020 and $10 million to $15 million annually for 2021 through 2025. Further charges for Georgia Power Company’s construction of Plant Vogtle Units 3 and 4 may occur; however, the amount and timing of any such charges are uncertain.
(3)	Earnings for the three and nine months ended September 30, 2020 and 2019 include Wholesale Gas Services business results. Presenting earnings and earnings per share excluding Wholesale Gas Services provides an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.
(4)	Earnings for the nine months ended September 30, 2020 include a pre-tax impairment charge of $154 million ($74 million after tax) related to a leveraged lease. Earnings for the three and nine months ended September 30, 2019 include a pre-tax impairment charge of $92 million ($65 million after tax) associated with Southern Company Gas’ natural gas storage facility in Louisiana. Further charges associated with this facility are not expected. Southern Company Gas has two other natural gas storage facilities which could be impacted by ongoing U.S. natural gas storage market changes that may imply impacts to future rates and/or asset values, and, if sustained, could trigger impairment.

Southern Company
Consolidated Earnings
As Reported
*(In Millions of Dollars)*
	Three Months Ended September						Year-to-Date September
	2020		2019		Change		2020		2019		Change
Income Account-
Retail Electric Revenues-
Fuel	$	949	$	1,083	$	(134)	$	2,301	$	2,807	$	(506)
Non-Fuel	3,294		3,429		(135)		8,202		8,329		(127)
Wholesale Electric Revenues	584		625		(41)		1,473		1,667		(194)
Other Electric Revenues	164		163		1		484		492		(8)
Natural Gas Revenues	477		498		(21)		2,362		2,661		(299)
Other Revenues	152		197		(45)		436		549		(113)
Total Revenues	5,620		5,995		(375)		15,258		16,505		(1,247)
Fuel and Purchased Power	1,163		1,326		(163)		2,801		3,461		(660)
Cost of Natural Gas	71		79		(8)		654		956		(302)
Cost of Other Sales	72		114		(42)		201		316		(115)
Non-Fuel O&M	1,286		1,296		(10)		3,785		3,898		(113)
Depreciation and Amortization	889		760		129		2,619		2,267		352
Taxes Other Than Income Taxes	304		303		1		932		931		1
Estimated Loss on Plant Vogtle Units 3 and 4	—		—		—		149		—		149
Impairment Charges	—		110		(110)		—		142		(142)
(Gain) Loss on Dispositions, net	—		(6)		6		(39)		(2,512)		2,473
Total Operating Expenses	3,785		3,982		(197)		11,102		9,459		1,643
Operating Income	1,835		2,013		(178)		4,156		7,046		(2,890)
Allowance for Equity Funds Used During Construction	38		33		5		106		96		10
Earnings from Equity Method Investments	33		39		(6)		105		120		(15)
Interest Expense, Net of Amounts Capitalized	443		434		9		1,343		1,294		49
Impairment of Leveraged Lease	—		—		—		154		—		154
Other Income (Expense), net	113		61		52		319		239		80
Income Taxes	293		367		(74)		443		1,872		(1,429)
Net Income	1,283		1,345		(62)		2,746		4,335		(1,589)
Less:
Dividends on Preferred Stock of Subsidiaries	4		4		—		11		11		—
Net Income (Loss) Attributable to Noncontrolling Interests	28		25		3		3		26		(23)
NET INCOME ATTRIBUTABLE TO SOUTHERN COMPANY	$	1,251	$	1,316	$	(65)	$	2,732	$	4,298	$	(1,566)

Notes

– Certain prior year data may have been reclassified to conform with current year presentation.

Southern Company
Kilowatt-Hour Sales and Customers
*(In Millions of KWHs)*

	Three Months Ended September						Year-to-Date September
	2020	2019	Change		Weather Adjusted Change		2020	2019	Change		Weather Adjusted Change
Kilowatt-Hour Sales-
Total Sales	53,099	56,703	(6.4)	%			140,910	150,303	(6.2)	%

Total Retail Sales-	40,218	43,090	(6.7)	%	(3.0)	%	106,724	114,207	(6.6)	%	(3.4)	%
Residential	14,740	15,368	(4.1)	%	3.5	%	36,485	37,790	(3.5)	%	3.7	%
Commercial	13,140	14,404	(8.8)	%	(5.1)	%	34,611	37,776	(8.4)	%	(5.9)	%
Industrial	12,177	13,133	(7.3)	%	(7.3)	%	35,129	38,084	(7.8)	%	(7.8)	%
Other	161	185	(12.6)	%	(12.3)	%	499	557	(10.5)	%	(10.3)	%

Total Wholesale Sales	12,881	13,613	(5.4)	%	N/A		34,186	36,096	(5.3)	%	N/A


*(In Thousands of Customers)*

							Period Ended September
							2020	2019	Change
Regulated Utility Customers-
Total Utility Customers-							8,580	8,462	1.4%
Total Traditional Electric							4,322	4,254	1.6%
Southern Company Gas							4,258	4,208	1.2%

Southern Company
Financial Overview
As Reported
*(In Millions of Dollars)*
	Three Months Ended September						Year-to-Date September
	2020		2019		% Change		2020		2019		% Change
Southern Company^{1, 2} –
Operating Revenues	$	5,620	$	5,995	(6.3)	%	$	15,258	$	16,505	(7.6)	%
Earnings Before Income Taxes	1,576		1,712		(7.9)	%	3,189		6,207		(48.6)	%
Net Income Available to Common	1,251		1,316		(4.9)	%	2,732		4,298		(36.4)	%

Alabama Power –
Operating Revenues	$	1,729	$	1,841	(6.1)	%	$	4,445	$	4,762	(6.7)	%
Earnings Before Income Taxes	578		617		(6.3)	%	1,340		1,288		4.0	%
Net Income Available to Common	444		469		(5.3)	%	1,022		982		4.1	%

Georgia Power –
Operating Revenues	$	2,617	$	2,755	(5.0)	%	$	6,371	$	6,706	(5.0)	%
Earnings Before Income Taxes	945		1,094		(13.6)	%	1,609		2,064		(22.0)	%
Net Income Available to Common	773		839		(7.9)	%	1,411		1,598		(11.7)	%

Mississippi Power –
Operating Revenues	$	336	$	370	(9.2)	%	$	895	$	970	(7.7)	%
Earnings Before Income Taxes	79		80		(1.3)	%	158		166		(4.8)	%
Net Income Available to Common	67		65		3.1	%	138		139		(0.7)	%

Southern Power² –
Operating Revenues	$	523	$	574	(8.9)	%	$	1,337	$	1,527	(12.4)	%
Earnings Before Income Taxes	116		130		(10.8)	%	242		301		(19.6)	%
Net Income Available to Common	74		86		(14.0)	%	212		316		(32.9)	%

Southern Company Gas –
Operating Revenues	$	477	$	498	(4.2)	%	$	2,362	$	2,661	(11.2)	%
Earnings (Loss) Before Income Taxes	17		(51)		N/M		458		408		12.3	%
Net Income (Loss) Available to Common	14		(29)		N/M		360		347		3.7	%

N/M – Not meaningful

Notes
– See Financial Highlights pages for discussion of certain significant items occurring during the periods presented.
(1)	Year-to-date earnings comparisons to the prior year were significantly impacted by the preliminary gain associated with the sale of Gulf Power Company on January 1, 2019.
(2)	Earnings and revenue comparisons to the prior year were significantly impacted by Southern Power Company’s dispositions of Plant Nacogdoches on June 13, 2019 and Plant Mankato on January 17, 2020.