Houston — The novel coronavirus pandemic and mild weather in the Southern Company footprint hurt power sales and increased the Vogtle nuclear power plant's Units 3 and 4 construction costs, resulting in a substantial drop in second-quarter earnings, compared with Q2 2019, a company presentation released July 30 shows.
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The large investor-owned utility company, which primarily serves power customers in Alabama, Georgia and Mississippi, reported earnings totaling $612 million, or 58 cents a share, in the second quarter, down from $899 million, or 86 cents a share, for the second quarter of 2019.
After adjusting for one-time events, such as estimated loss on the Vogtle Units 3 and 4, net income totaled $822 million, or 78 cents/diluted share in Q2 2020, down from $833 million, or 80 cents/share, for Q2 2019.
"Earnings drivers year-over-year for the second quarter 2020 were negatively impacted by a decline in sales from demand reduction related to the COVID-19 pandemic and mild weather, largely offset by diligent cost control and constructive state regulatory actions completed in 2019 at the company's utilities," Southern Company said in its news release.
Total power sales fell by 10.1%, year on year, to 43.5 TWh in Q2 2020. The biggest percentage decrease was in the commercial sector, which was down 15% year on year to 10.5 GWh, before adjusting for the mild weather. With such adjustment, the reduction was just 11.5%.
The weather was substantially milder during Q2 2020 than it was in Q2 2019. Population-weighted cooling-degree days for the most recently completed quarter for Alabama, Georgia and Mississippi were down 22.7% from the Q2 2019 CDDs, according to CustomWeather data.
The industrial sector was down 14% to 10.9 TWh, which does not change with weather adjustment; therefore, Southern's industrial customer base showed the biggest post-adjustment percentage decrease at 14%.
In a July 30 earnings conference call, Andrew Evans, Southern's executive vice president and chief financial officer, said, "The estimated impact during the quarter from COVID-19 was negative 10 cents[/share] and the weather impact relative to normal was negative 3 cents[/share]."
Thomas Fanning, Southern's chairman, president and CEO, described the Q2 2020 earnings as "strong adjusted results ... meaningfully ahead of the estimate we provided last quarter," Fanning said, but added that "these are unusual times on multiple fronts," including the pandemic and unrest in cities across the globe over racial injustice.
Fanning acknowledged that he had tested positive for COVID-19, but was asymptomatic. His wife also tested positive and had felt ill, but both are well now, Fanning said, and he no longer tests positive for the virus.
Increased cost estimate
Southern in the second quarter increased its Vogtle nuclear plant construction cost estimate by about $115 million to $8.5 billion, "largely reflecting estimated COVID-19 impacts and other costs and a replenishment of contingency based on our projections for the remainder of the project."
"In the second quarter, we experienced significant impacts from COVID-19, among other factors," Fanning said. "While the recent workforce reduction was effective in decreasing density at the site and increasing efficiency, we were unable to achieve the anticipated level of reduction."
Southern expects to begin Unit 3 hot functional testing in the fourth quarter of 2020, Fanning said, "And we continue to see a path to Unit 3 fuel load by year end."
"The team at Vogtle Units 3 and 4 continues to work incredibly hard and drive meaningful progress at the site, even while managing through the pandemic," Fanning said. "As we near the final phases of construction for Unit 3 and move closer to fuel load, I can assure you that the construction team, our management team and our partners are more focused than ever on bringing in the first unit of this historic project to completion next year."