Southern Co. is weighing asset sales to offset near-term equity needs or fund long-term capital investment plans, the utility giant's CEO said Nov. 4.
"With a portfolio the size of Southern Co., we have several investments which warrant continuous review for whether or not a better owner exists," Chairman, President and CEO Tom Fanning said during the company's third-quarter earnings call. "We have ideas right now; we really don't want to front-run in the public what those ideas are about assets. ... We'll see whether they come to fruition or not."
Executive Vice President and CFO Daniel Tucker said the equity needs are centered around recent cost increases at the Vogtle Nuclear Plant expansion.
The company is committed to mitigating impact on the company's credit profile, potentially with asset sales, Tucker said.
"We're not going to buy or sell things which make ourselves more risky," Fanning added. "We love the idea of reasonable return and low risk."
Despite recent delays, Fanning maintained optimism about hitting new in-service projection dates of third-quarter 2022 for unit 3 and second-quarter 2023 for unit 4.
Fleet transition
The company is looking to post-Vogtle opportunities including further coal retirements and clean energy investments on the way to a clean energy goal of net-zero greenhouse gas emissions by 2050.
Subsidiaries Georgia Power Co. and Alabama Power Co. recently filed plans with their respective state environmental authorities detailing how each utility expects to comply with U.S. Environmental Protection Agency's effluent limitation guidelines.
With those expected changes and the recent retirement announcement of two units at Mississippi Power Co.'s 1,004-MW Victor J. Daniel Jr. coal-fired plant, Fanning said that "since 2007, Southern Co. will have announced total decreases in its coal generating capacity from more than 20,000 MW across nearly 70 generating units to less than 4,500 MW of coal capacity remaining at eight generating units," or a roughly 80% reduction.
Retiring coal plants will free up operations and maintenance costs, Fanning said, which could allow for cost recovery, account for new replacement generation and keep rates lower.
In addition to considering asset sales, Southern is also eyeing potential asset acquisitions, particularly used assets or "bridging assets," that may have a remaining life of 10 to 15 years, that fit with existing retirement schedules and that are consistent with adding renewables, executives said.
"To get to net-zero for us, we're going to have a profile in the 2040s to 2050 that will look something like 50% renewables, maybe 20% nuclear, maybe 25% natural gas. ... A lot of that will have [carbon capture and storage]," Fanning said. "The kind of tail end of that, you know, the 5% remaining could be something different. It could be hydrogen, it could be a variety of other things."
Q3 results
Southern reported third-quarter earnings of $1.10 billion, or $1.04 per share, compared to $1.25 billion, or $1.18 per share, in the third quarter of 2020. Earnings drivers year over year for the third quarter compared to the same period in 2020 were "strong customer usage, robust customer growth and constructive state regulatory actions" partially offset by higher nonfuel operations and maintenance costs. Earnings were also impacted by a $197 million after-tax charge related to the Vogtle expansion project.
Third-quarter operating revenues were $6.24 billion, compared to $5.62 billion for the third quarter of 2020, an increase of about 11%.
