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Houston — Record-high temperatures across Southern Company's service territories combined with enhanced rates and prices to boost its earnings per share by 17.5% year on year in the third quarter of 2019, the company said Wednesday.

"We experienced record heat in the Southeast this summer, recording all-time September peakload days four times during the month," Southern Company CEO Tom Fanning said during a Wednesday webcast, adding that "the fourth quarter is off to a strong start with our electric utilities, with unseasonably warm temperatures in early October."

Drew Evans, chief financial officer, said the company's EPS of $1.34, after adjusting for the sale of Gulf Power, was 24 cents above the estimate provided in the company's Q2 earnings call and 20 cents higher than its Q3 2018 adjusted EPS.

"Temperatures across our Southeast service territory were significantly warmer than normal during the third quarter of 2019, including the warmest September in the last 50 years, resulting in 9 cents of benefit compared to last year and 15 cents of benefit versus normal," Evans said.

The company's adjusted earnings totaled $1.4 billion in the latest quarter, up from $1.16 billion in Q3 2018. As-reported income totaled $1.32 billion in the latest quarter, up from $1.16 billion in Q3 2018.


Fanning said: "Importantly, even amid these conditions, a diverse fuel mix enabled Southern Company's system to reduce our carbon emissions by approximately 35% compared to the strongest demand of 2007, our benchmark year for carbon emissions."

Southern Company cut coal-fired generation's share of its year-to-date generation mix by 5 percentage points to 22%, and hiked natural gas plants' share by 3 percentage points, and boosted nuclear and renewables' output by 1 percentage point each, according to its earnings.

The company's power sales in Q3 totaled 56.7 TWh, up 1.4% from the 55.9 TWh sold by continuing operations in Q3 2018, it said.

"Excluding the impact of weather, our 11-cents [EPS] increase over the prior year was primarily driven by higher revenues at our regulated utilities," Evans added. "The revenue increase reflects the impacts of tax reform and related changes in capital structure."

Weather-adjusted retail electric sales fell about 2% year on year because of enhanced energy efficiency, technological advances and "continued weaker industrial sales," Evans said.

"Industrial sales, particularly primary metals, petroleum, paper and textiles, were down due to global trade concerns as well as changes in production levels and demand response programs," Evans said.

Fanning said 40-50% of Georgia Power's industrial and commercial load is subject to real-time pricing.

"That, recall, sends the price signals to customers, and customers on their own can react to it or not," Fanning said. "In other words, if they're making more money by driving through a peak period, well, good for them. If they want to shut down during a high-cost period, they can take that as well."

Pricing improvements and customer growth - driven in part by the southeastern US' strong job and population growth - also contributed to enhanced earnings, Evans said. Southern added about 30,000 residential electric customers and 21,000 residential natural gas customers in the quarter, compared with Q3 2018, he said.


A key concern for investors has been Southern Company's construction of two nuclear plants at its Vogtle site in Georgia, which Fanning said highlighted "our outstanding operational performance this quarter."

Southern's Georgia Power utility and three partners are building two 1,117-MW nuclear reactors near two existing units. Design, licensing and construction problems have delayed completion by five years and nearly doubled projected costs to about $28 billion.

The Vogtle units' construction "is approximately 81% complete with Unit 3 direct construction currently 77% complete," Fanning said. Vogtle 3 and 4 are scheduled to start up in November 2021 and 2022, respectively.

"The project's major milestones for 2019 have been achieved or are expected to begin as planned later this year," Fanning said. "At this point in the project, Unit 4 is progressing slightly ahead of its aggressive site plan. ... Unit 3 construction is currently lagging its aggressive site plan. The primary driver is a backlog in the installation of electrical commodities and increased system turnover activity. ... Southern Nuclear [has started] implementing a productivity improvement plan to address the electrical backlog."

Southern began "integrated flush activities for Unit 3 in August," which is 60% complete and "continues to support the start of open vessel testing later this year, our next major milestone expected for 2019," Fanning said.

Open vessel testing will continue into early 2020, he said.

"Additionally, we expect to have the ability to test plant systems from the main control room before the end of the year," Fanning said. "Within a year, we expect construction to be largely complete for Unit 3, and we expect to be preparing Unit 3 for fuel load."

-- Mark Watson,

-- Edited by Keiron Greenhalgh,