Credit Suisse 20 th Annual Energy Summit Vail, CO. February 24, 2015

Transcription

1 Credit Suisse 20 th Annual Energy Summit Vail, CO February 24, 2015

2 Cautionary Note Regarding Forward-Looking Statements Certain information contained in this presentation is forward looking information based on current expectations and plans that involve risks and uncertainties. Forward looking information includes, among other things, statements concerning projected costs and schedules for the completion and start-up of ongoing construction projects, including estimated costs, the potential mitigation of forecasted delays and the recovery of liquidated damages related to the Plant Vogtle expansion, as well as expected impact to customers, earnings per share guidance, dividend growth, the economic outlook, expected sales growth, projected capital expenditures and projected financing plans including potential stock repurchases. Southern Company cautions that there are certain factors that can cause actual results to differ materially from the forward looking information that has been provided. The reader is cautioned not to put undue reliance on this forward looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Southern Company s Annual Report on Form 10 K for the year ended December 31, 2013, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward looking information: the impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, environmental laws including regulation of water, coal combustion residuals, and emissions of sulfur, nitrogen, carbon dioxide, soot, particulate matter, hazardous air pollutants, including mercury, and other substances, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries, including pending Environmental Protection Agency civil actions against certain Southern Company subsidiaries, Federal Energy Regulatory Commission matters, and Internal Revenue Service and state tax audits; the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company s subsidiaries operate; variations in demand for electricity, including those relating to weather, the general economy and recovery from the last recession, population and business growth (and declines), the effects of energy conservation measures, including from the development and deployment of alternative energy sources such as self generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions; available sources and costs of fuels; effects of inflation; ability to control costs and avoid cost overruns during the development and construction of facilities, which include the development and construction of generating facilities with designs that have not been finalized or previously constructed, including changes in labor costs and productivity factors, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non performance under construction or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, delays associated with start up activities (including major equipment failure and system integration), and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by any Public Service Commission ( PSC )); ability to construct facilities in accordance with the requirements of permits and licenses, to satisfy any environmental performance standards, and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction; investment performance of Southern Company s employee and retiree benefit plans and the Southern Company system s nuclear decommissioning trust funds; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms; legal proceedings and regulatory approvals and actions related to the Plant Vogtle expansion, including Georgia PSC approvals and Nuclear Regulatory Commission actions and related legal proceedings involving the commercial parties; actions related to cost recovery for the integrated coal gasification combined cycle facility under construction in Kemper County, Mississippi ( Kemper IGCC ), including actions relating to proposed securitization, Mississippi PSC approval of Mississippi Power Company s proposed rate recovery plan, as ultimately amended, which currently includes the ability to complete the proposed sale of an interest in the Kemper IGCC to South Mississippi Electric Power Association, the ability to utilize bonus depreciation, which currently requires that assets be placed in service in 2015, and satisfaction of requirements to utilize investment tax credits and grants; Mississippi PSC review of the prudence of Kemper IGCC project costs; the outcome of any legal or regulatory proceedings regarding any settlement agreement between Mississippi Power Company and the Mississippi PSC, the March 2013 rate order approving retail rate increases consistent with the terms of the settlement agreement, or the State of Mississippi legislation designed to enhance the Mississippi PSC s authority to facilitate development and construction of baseload generation in the State of Mississippi; the inherent risks involved in operating and constructing nuclear generating facilities, including environmental, health, regulatory, natural disaster, terrorism, and financial risks; the performance of projects undertaken by the non utility businesses and the success of efforts to invest in and develop new opportunities; internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries; the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required; the ability to obtain new short and long term contracts with wholesale customers; the direct or indirect effect on the Southern Company system s business resulting from terrorist incidents and the threat of terrorist incidents, including cyber intrusion; interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company s and its subsidiaries credit ratings; the impacts of any potential U.S. credit rating downgrade or other sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on currency exchange rates, counterparty performance, and the economy in general, as well as potential impacts on the benefits of the U.S. Department of Energy loan guarantees; the ability of Southern Company s subsidiaries to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as influenzas, or other similar occurrences; the direct or indirect effects on the Southern Company system s business resulting from incidents affecting the U.S. electric grid or operation of generating resources; and the effect of accounting pronouncements issued periodically by standard setting bodies. Southern Company expressly disclaims any obligation to update any forward looking information. 2

3 Southern Company A Solid Foundation >90% of earnings from our regulated subsidiaries Forward-looking, constructive regulatory frameworks Industry leading operations Diverse, growing Southeast economy and customer base 2014 Top 4 in annual benchmark survey EFOR at industry leading levels All time records for T&D metrics APC rated America s most-trusted residential electric utility 3

4 Vogtle Construction Site as of January 21, 2015 Priorities are safety and quality 100% fixed/firm EPC contract Significant front-end engineering during NRC design certification PWR is not new technology (new safety features for AP1000) Significant oversight (SNC, NRC, GPSC, co-owners) Projected impact to customer rates is between 6% - 8% with over 4% already in rates Statutory recovery of all prudently incurred costs (O.C.G.A. 46-3A-7) 4

5 Kemper Project Update Combined Cycle in service August 2014 Expected in-service date for remainder is 1st half parallel paths toward first syngas production in Q3 Operational training Control systems validation Start-up & check-out Next major milestone: Gasifier First Fire Continuing regulatory discussions 5

6 Quality Southern Power Assets 9,039 MWs of Capacity Adobe (CA) Solar 18 MW Spectrum (NV) Solar 27 MW Apex (NV) Solar 18 MW Cimarron (NM) Solar 27 MW Cleveland CTs 720 MW Wansley 6&7 CCs 1,073 MW Rowan 531 MW CC 455 MW CT Granville Solar 2 MW Campo Verde (CA) Solar 125 MW Solargen2 (CA) Solar 77 MW Macho Springs (NM) Solar 45 MW Nacogdoches (TX) Biomass 100 MW Harris 1&2 CCs 1,319 MW Franklin 1, 2, & 3 CCs 1,858 MW Addison CTs 669 MW Dahlberg 1 10 CTs 756 MW Oleander 1 5 CTs 791 MW Business Model Build or buy assets supported by long term contracts with credit worthy counterparties Develop long term relationships / partnerships that leverage our operational excellence Minimize fuel and transmission risk Commitment to financial integrity Newly Announced Projects 131 MW Solar Taylor County (GA EMCs) 4Q 2016 COD 80 MW Solar Decatur Parkway and 19 MW Solar Decatur County 4Q2015 COD Note: Capacity reflects Southern Power s equity ownership interest based on PPA offtake Stanton A CC 428 MW Breakdown by Fuel (in service) Fuel Type MW % of Total Nat. Gas 8,600 95% Biomass 100 1% Solar 339 4% Total 9, % 6

7 Financial Outlook

8 $16.6B Capital Expenditure Forecast for 2015 to 2017 '15-'17 So Power Placeholders for Growth $1.9B Southern Power Base $1.2B Environmental $2.2B Financing Plan Traditional OpCo s $13.5B New Generation Transmission Distribution Generation Maintenance Nuclear Fuel Other $2.6B $1.9B $2.4B $2.5B $0.8B $1.0B No new equity needs DOE Loan draws totaling $1.85B Industry leading financial integrity Notes: Totals may not add due to rounding and amounts are subject to change in the K. Includes amounts for which Mississippi Power will not seek recovery above the $2.88B Kemper IGCC cost cap, net of DOE grants and cost cap exceptions, of $0.8B & $0.1B in 2015 and 2016, respectively includes $0.6B of SMEPA s expected 15% ownership share. Southern Power Base includes $0.7B & $0.2B of identified growth projects in 2015 & 2016, respectively. 8 8

9 Earnings Per Share Guidance 1 $ results at top of range* $ $2.72 $2.76 Q Estimate: $0.55 *Excludes 2014 EPS impact of -59 for updated Kemper Project cost estimates; GAAP EPS was $2.21 for Adjusted earnings per share guidance was provided during the Company s earnings call on February 4, 2015 and speaks only as of that date 9

10 Dividend Growth Objectives* Goal of regular, predictable, and sustainable EPS growth is supportive of a growing dividend * Future dividend increases are subject to board of directors approval 10

11 Appendix

12 2014 Retail Sales Growth vs. Prior Year Quarter-to-date As Reported Weather Normal As Reported Year-to-date Weather Normal Residential -0.2% -0.2% 5.5% 0.0% Commercial -0.8% -0.3% 1.3% -0.4% Industrial 2.3% 2.3% 3.3% 3.3% Total Retail Sales 0.5% 0.6% 3.3% 0.9% 7 Quarters of Continued Industrial Sales Growth Industrial Sales Growth % vs. Prior Year 4.8% 4.8% 2.6% 2.8% 3.0% 2.3% 0.6% 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 12

13 2015 Outlook Economic Roundtable Expected 2015 Sales Growth GDP projected growth of around 3.0% Industrial activity will continue to improve, but constrained by strengthening dollar and low oil prices 1.0% 1.4% 1.7% 1.3% Improving housing market and consumer spending could offset headwinds Global economy expected to remain sluggish Residential Commercial Industrial Total Retail Sales 13

14 CapEx Forecast Functional Total $billions '15-'17 New Generation $1.3 $0.9 $0.4 $2.6 Environmental Compliance $1.1 $0.5 $0.6 $2.2 Generation Maintenance $1.0 $0.8 $0.8 $2.5 Transmission Growth Transmission Maintenance Total Transmission $0.6 $0.5 $0.6 $1.7 Distribution Growth Distribution Maintenance Total Distribution $0.9 $0.9 $0.9 $2.6 Nuclear Fuel $0.3 $0.2 $0.3 $0.8 General $0.3 $0.3 $0.4 $1.0 Traditional OpCo Total $5.4 $4.2 $3.9 $13.5 Southern Power Base $0.8 $0.3 $0.1 $1.2 Southern Power Expansion $0.6 $1.0 $0.3 $1.9 Total Consolidated $6.8 $5.5 $4.3 $16.6 Notes: Totals may not add due to rounding and amounts are subject to change in the K. Includes amounts for which Mississippi Power will not seek recovery above the $2.88B Kemper IGCC cost cap, net of DOE grants and cost cap exceptions, of $0.8B & $0.1B in 2015 and 2016, respectively includes $0.6B of SMEPA s expected 15% ownership share. Southern Power Base includes $0.7B & $0.2B of identified growth projects in 2015 & 2016, respectively. 14

15 CapEx Forecast Company Total $billions '15-'17 Alabama Georgia Gulf Mississippi Other Subsidiaries Traditional OpCo Total $5.4 $4.2 $3.9 $13.5 Southern Power Total Capex $6.8 $5.5 $4.3 $16.6 Notes: Totals may not add due to rounding and amounts are subject to change in the K. Includes amounts for which Mississippi Power will not seek recovery above the $2.88B Kemper IGCC cost cap, net of DOE grants and cost cap exceptions, of $0.8B & $0.1B in 2015 and 2016, respectively includes $0.6B of SMEPA s expected 15% ownership share. Southern Power Base includes $0.7B & $0.2B of identified growth projects in 2015 & 2016, respectively. 15

16 Financing Plan ($ in millions) Georgia DOE Loan $ 1,000 $ 550 $ 300 $ 1,850 Mississippi Securitization - - 1,000 1,000 Mississippi Bank Debt 1, ,250 Capital Markets Alabama $ 700 $ 300 $ 550 $ 1,550 Georgia 600 1, ,000 Gulf Mississippi Southern Power (1) 1, ,250 Holding Company (2) ,850 Total Capital Markets $ 3,050 $ 2,275 $ 2,050 $ 7,375 Total Debt Issuances $ 5,300 $ 2,825 $ 3,350 $ 11,475 Common Equity Needs $ - $ - $ - $ - (1) Includes $500M and $250M in 2015 and 2016, respectively, for potential Southern Power growth projects (2) Includes $350M in 2015 for potential Southern Power growth projects 16

17 Generation Portfolio Diversity Capacity Factors Q4 YTD Coal - PRB 79% 68% 74% 73% Coal - Non-PRB 25% 21% 30% 44% Gas - Combined Cycle 65% 71% 66% 64% Energy Mix Q4 YTD Natural Gas 42% 49% 41% 40% Coal 37% 31% 38% 40% Nuclear 17% 16% 16% 16% Hydro/Other 4% 4% 5% 4% 17

18 Vogtle Construction Update Unit 3 Unit 4 Progress Continued CA01 module assembly Continued Nuclear Island wall placements Set CA05 Began Auxiliary Building metal decking installation Completed Cooling Tower Near term Concrete inside CVBH 1 to EL 83 ft Concrete under CVBH 1 to EL 90 ft 6 in. Continue Auxiliary Building metal decking installation Progress Continued CA20 module fabrication Continued 500kV switchyard upgrades Continued Nuclear Island wall placements Began Cooling Tower Near term Set CA04 Set CB65 and CB66 Continue Nuclear Island wall placements On the horizon Continue Auxiliary Building metal decking installation Shield Building panel installation Concrete under CVBH 1 to EL 100 ft On the horizon Concrete in CVBH 1 to EL 76 ft 6 in. Concrete under CVBH 1 to EL 82 ft 6 in. 1. CVBH: containment vessel bottom head 18

19 Vogtle Units 3&4 Nuclear Island Activity Unit 3 Unit 4 Current View Concrete inside CVBH Formwork Concrete Placed Unit 3 Unit 4 Lower Ring CA04 Near Term CA04 CB65 CA05 CB65 Formwork Metal Decking Concrete Placed 19

20 Kemper IGCC Combined Cycle 20

21 Kemper County IGCC First of a kind technology developed by SO and KBR Carbon footprint equivalent to a combined cycle natural gas unit 65% CO 2 capture for enhanced oil recovery (EOR) Affordable, abundant, low-rank coal resource Mine mouth lignite coal 21

22 TRIG TM Attributes / Advantages Presalter Cyclone syngas Standpipe Cyclone Simple, well established design Riser Either air- or oxygen-blown High reliability design Mixing Zone Startup Burner coal Seal Leg air/o2 steam J-leg Standpipe Lower fuel costs Excellent environmental performance ash syngas 22

23 Renewables Southern Power owns ~ 570MW of utility scale solar operating or under development, mainly in the Southwest and Georgia Solar initiatives in Georgia projected to provide ~800 MW of solar capacity to Georgia Power by 2016 Gulf Power working with HelioSage Energy to potentially develop ~120 MWs of solar generation at military facilities in Pensacola Alabama Power, Georgia Power and Gulf Power combined have ~900 MW of PPAs from wind farms in Oklahoma and Kansas Southern Power owns 100MW Biomass plant in Nacogdoches, TX one of the largest in North America 23

24 Southern Power s Solar Portfolio Asset Size SPC Ownership Location PPA Term Offtaker Technology Purchase Price COD Date Operational Assets SolarGen2 150 MW 77 MW Imperial Co, CA 25 yr SDG&E Macho Springs 50 MW 45 MW Luna Co, NM 20 yr El Paso Electric Adobe 20 MW 18 MW Kern Co, CA 20 yr SCE Campo Verde 139 MW 125 MW Imperial Co, CA 20 yr SDG&E Spectrum 30 MW 27 MW Las Vegas, NV 25 yr NVE Granville 3 MW 2 MW Oxford, NC 20 yr Duke Energy Apex 20 MW 18 MW Las Vegas, NV 25 yr NVE Cimarron 30 MW 27 MW Springer, NM 20 yr Tri State Projects Under Development GA EMCs 131 MW 131 MW Taylor Co, Ga 25 yr Georgia Power Decatur Parkway 80 MW 80 MW Bainbridge, GA 25 yr Georgia Power First Solar and Canadian Solar Thin Film (FS Trackers) First Solar Thin Film (FS Trackers) MEMC Crystalline (Gestamp Trackers) First Solar Thin Film (Fixed) MEMC Crystalline (ATI Trackers) MEMC Crystalline (ATI Trackers) Trina Crystalline (ATI Trackers) First Solar Thin Film (Fixed) First Solar Thin Film (FS Trackers) First Solar Thin Film (FS Trackers) $500M Nov 2014 $130M May 2014 $100M May 2014 $500M Oct 2013 $120M Sep 2013 $10M Oct 2012 $100M Jul 2012 $100M Nov /2016 Decatur County 19 MW 19 MW Bainbridge, GA 20 yr Georgia Power Crystalline 2015/

25 Investor Relations Contact Info Dan Tucker Vice President, Investor Relations & Financial Planning Jimmy Stewart Manager, Investor Relations Main website: IR website: CSR website:

26 Environmental Reports Carbon Disclosure Report This update for 2014 details actions the Southern Company system is taking on greenhouse gas emissions and incorporates information the company previously submitted to the Carbon Disclosure Project. Water Action Report A report on how the Southern Company system manages water resources in the production of electricity. Coal Combustion Byproducts A report on the system's production and safe management of coal combustion byproducts. Renewables 26