Southern Company Overview Doing Energy Better. September 2015

Transcription

1 Southern Company Overview Doing Energy Better September 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 the proposed acquisition of AGL Resources, including the expected benefits of and timing of completion of the transaction, statements concerning projected costs and schedules for the completion and start-up of ongoing construction projects, including expected regulatory actions, cost recovery, and customer rates impact, earnings per share guidance, the economic outlook, expected sales growth, dividend objectives, projected generation mix, projected capital expenditures, and projected financing plans. 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, 2014, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward looking information: risks related to the proposed acquisition of AGL Resources, including the failure to receive, on a timely basis or otherwise, the required approvals, the possibility that long-term financing for the transaction may not be put in place prior to the closing, the risk that a condition to closing of the merger or the committed financing may not be satisfied, the possibility that the anticipated benefits from the proposed merger cannot be fully realized or may take longer to realize than expected, the possibility that integration costs will be greater than expected, and the risk that credit ratings of the combined company or its subsidiaries may be different than expected; the impact of recent and future federal and state regulatory changes, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries; 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; effects of inflation; the 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, 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, 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 )); the 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; 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 Plant Vogtle Units 3 and 4, 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 the ultimate impact of the 2015 decision of the Mississippi Supreme Court, the Mississippi PSC s August 2015 interim rate order, and any further related legal or regulatory proceedings, Mississippi PSC review of the prudence of Kemper IGCC costs and approval of permanent rate recovery plans, actions relating to proposed securitization, the ability to utilize bonus depreciation, which currently requires that assets be placed in service in 2015, satisfaction of requirements to utilize investment tax credits and grants, and the ultimate impact of the termination of the proposed sale of an interest in the Kemper IGCC to South Mississippi Electric Power Association; the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and the successful performance of necessary corporate functions; 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 cyber intrusion or terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts; changes in Southern Company's and any of its subsidiaries' credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements; the impacts of any 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 and other storms, 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 standardsetting bodies. Southern Company expressly disclaims any obligation to update any forward-looking information. 2

3 Investor Relations Contact Info Dan Tucker Vice President, Investor Relations & Financial Planning Jimmy Stewart Manager, Investor Relations Main website: IR website: CSR website: Environmental : 3

4 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 residuals. Renewables 4

5 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 5

6 Southern Company - Overview Our Story Today A proven, customerfocused business model A strong, improving regional economy Executing on major construction projects Expanding Southern Power s portfolio A solid, growing dividend* Our Story Tomorrow Twice as many customers across the energy value chain Stronger growth prospects An unmatched shareholder value proposition (a function of risk and return) + *Future dividend actions are subject to Board of Directors approval 6

7 Vogtle Construction Site as of July 2015 Priorities are safety and quality 100% fixed/firm EPC contract Significant front-end engineering during NRC design certification Pressurized Water Reactors are 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) 7

8 Vogtle Units 3 & 4 Set Unit 3 CA-01 Module Unit 3 shield building panel installation underway 91% of engineering and 76% of procurement complete for entire project (both units) $3.1B out of $5B spent ($3B verified and approved by PSC) No change in costs or schedule in VCM 13 (filed August 28 th docket 29849) 8

9 Unit 3 Unit 4 Nuclear Island Placed concrete inside CVBH to 83 ft Completed concrete under CVBH to 87 ft 6 in. Continued installation of rebar and embeds outside CVBH for concrete to 94 ft and 90 ft 6 Placed basement for Annex Bldg Set CA-01 Installed 6 Shield Building panels on West side Vogtle Construction Update Nuclear Island Continue to implement lessons learned from Unit 3 Set CA-04 inside the CVBH Continued preparation for interior and exterior concrete wall placements Rebar installation for exterior walls up to elevation 100 ft Set CB65 and CB66 Turbine Island Placed ~280 cubic yards of concrete, ~65 tons of rebar and ~1,300 tons of structural steel Set equipment including start-up feedwater pumps and high pressure feedwater heaters Completed structure steel and concrete floors to 120 ft Annex Building Planning supports progress to elevation 154 ft Progress on Annex Bldg activities support initial energization CVBH: containment vessel bottom head Turbine Island Made significant vertical progress; ~2,500 cubic yards of concrete, ~500 tons of rebar and ~650 tons of structural steel Set 2 of 3 condenser and auxiliary boiler Installed condensate pumps and began installation of main feedwater pumps Cooling Tower Transferred framework from Unit 3 to resume vertical construction activities Vertical construction at ~150 ft 9

10 Vogtle Units 3 and 4 The rest of the plant Unit 3 Turbine Building Unit 3 Annex Building Unit 4 Nuclear Island & Turbine Building Unit 4 CA-20 Units 3 & 4 Cooling Towers Unit 3 Shield Building Panels 10

11 Vogtle Units 3 and 4 The rest of the story Projected annual rate increases <1% per year (low end of 6% to 8% in total by COD) The certified cost approved by the Commission does not constitute a cost recovery cap. (PSO Order 4/7/2015) This is a good project and remains a good project for Georgia (Commissioner Doug Everett 4/7/15) With the EPA bearing down on our coal plants, finishing these reactors is paramount if we are to comply with their new rule (Commissioner Tim Echols 4/7/15) I am pleased that we will have the first two new nuclear facilities in the country that I believe will serve the ratepayers into the next century, (Commissioner Stan Wise 4/7/15) 11

12 Plant Ratcliffe at Kemper County 12

13 Plant Ratcliffe at Kemper County Major Start-Up and Check-out Activities What s left to do? Gasifier Fluidization (A&B) Gasifier Refractory Cure (A&B) 1 st Lignite Feed (A) 1 st Syngas to CT (A) Harmonize (Fuel Gasifier Byproducts CC) Final Start-Up 1 st Lignite Feed (B) 1 st Syngas to CT (B) Two train operation Environmental Permit Testing Harmonize (Fuel Gasifier Byproducts CC) Clean, Reliable Two Train Operation Combined cycle in service Expected in-service date for remainder of project is first half 2016 Interim rates of $159M/yr granted August 13th Decision on permanent rates for in-service assets expected by December 8th 13

14 Mississippi Power In-Service Asset Rate Proposal $159 million interim rate request granted by the MPSC on August 13, 2015, subject to refund and issuance of bond Schedule for Mississippi Power s In-Service Asset Rate Proposal: September 28, Intervenors and the Public Utilities Staff to file direct testimony, final exhibits and other information to be relied upon at the hearing October 5, 2015 Deadline for all discovery October 12, 2015 Deadline for MPC to file rebuttal testimony October 20, 2015 Pre-hearing conference November 10, 2015 Hearings December 8, 2015 Final order to be issued on or before this date 14

15 Kemper IGCC Combined Cycle 15

16 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 16

17 Quality Southern Power Assets Coverage Average contract length 10yrs 5 year demonstrated capacity 78% 10 year demonstrated capacity 71% 17

18 Renewable Portfolio Operational Assets Asset Size (MW) SPC Ownership (MW) Location PPA Term Offtaker COD Date Technology Cimarron Springer, NM 20 years Tri State Nov 2010 Apex Las Vegas, NV 25 years NVE Jul 2012 Granville 3 2 Oxford, NC 20 years Duke Energy Oct 2012 Spectrum Las Vegas, NV 25 years NVE Sep 2013 Campo Verde Imperial Co, CA 20 years SDG&E Oct 2013 Adobe Kern Co, CA 20 years SCE May 2014 Macho Springs Luna Co., NM 20 years El Paso Electric May 2014 Imperial Valley Imperial Co., CA 25 years SDG&E Nov 2014 Lost Hills Blackwell Kern Co., CA 29 years 4 yr. City of Roseville 25 yr. PG&E Apr 2015 North Star Fresno Co., CA 20 years PG&E Jun 2015 First Solar Thin Film (Fixed) Trina Crystalline (ATI Trackers) MEMC Crystalline (ATI Trackers) MEMC Crystalline (ATI Trackers) First Solar Thin Film (Fixed) MEMC Crystalline (Gestamp Trackers) First Solar Thin Film (FS trackers) First Solar Thin Film (FS trackers) FS Series 3 Black Plus (FS Trackers) First Solar Thin Film (FS Trackers) Nacogdoches Nacogdoches, TX 20 years City of Austin Jun 2012 Biomass Subtotal Operating Assets

19 Renewable Portfolio Projects Under Construction Asset Size (MW) SPC Ownership (MW) Location PPA Term Offtaker COD Date Technology Taylor County (EMC) Taylor County, GA 25 years Cobb, Flint and Sawnee EMC s Oct 2016 Decatur Parkway Decatur County, GA 25 years Georgia Power Dec 2015 Decatur County Decatur County, GA 20 years Georgia Power Dec 2015 Butler Taylor County, GA 30 years Georgia Power Oct 2016 Pawpaw Taylor County, GA 30 years Georgia Power Target Dec 2015 Butler Solar Farm Taylor County, GA 20 years Georgia Power Target Dec 2015 Desert Stateline San Bernardino, CA 20 years Tranquillity Fresno County, CA 15 years Kay Wind Kay County, OK 20 years Grant Wind Grant County, OK 20 years Subtotal Under Construction 1,359 1,112 Grand Total 2,041 1,636 Southern California Edison Southern California Edison Westar (199 MW) GRDA (100 MW) E. Texas Elec. Coop W. Texas Elec. Coop W. Farmers Elec. Coop Through Jul 2016 Q Dec 2015 First Solar Thin Film (FS Trackers) First Solar Thin Film (FS Trackers) Jinko Crystallin (Tracker) First Solar Thin Film (FS Trackers) Trina (NextTracker) First Solar Thin Film (FS Trackers) First Solar Thin Film (Fixed) REC Modules (Tracker) 130WT s Siemens Q Siemens SWT

20 Southern Company to acquire AGL Resources SO to acquire GAS shares for $66 per share Expected to close in the 2 nd half of 2016 Major Approvals Required AGL Resources shareholders Hart-Scott-Rodino Key state approvals required Georgia Public Service Commission Illinois Commerce Commission New Jersey Board of Public Utilities Maryland Public Service Commission Virginia State Corporation Commission Accretive to on-going EPS in the first full year Expected long-term EPS growth of 4% to 5% Supports a strong credit profile and preserves the ability to invest in additional value-accretive projects Opportunity to raise the dividend growth rate, subject to board approval Learn more at 20

21 Acquisition Financing Plan Credit profile supportive of current credit ratings within 3 years of transaction closing Improves near term balance sheet through early equity issuances Preserves Southern Company s ability to invest in additional value-accretive projects Q thru mid-2016 Near closing in 2 nd half of 2016 Post-close thru 2019 Issue $1 billion of equity Issue $7 billion of debt Issue $2 billion of equity Reduce $2 billion of debt Equity to be issued through similar means as in the past Committed bridge facility from Citi ensures ability to fund closing 21

22 Strategic Rationale Advances customer-focused business model Strengthens our mostly-regulated earnings profile A broader platform for long-term success as end-use energy consumption evolves Combined natural gas consumption supports expanded infrastructure opportunities Doing Energy Better Make Energy Better Move Energy Better So That Customers Can Use Energy Better 22

23 ~70% of earnings from regulated operations, growing to ~80% Largest gas-only LDC, serving approximately 4.5 million customers in 7 states Retail marketer of natural gas and related services for over 1 million customers in 24 states Established and growing midstream operations AGL Resources Overview 23

24 AGL Resources Value Drivers 95% of projected capital investments are for regulated utilities and pipelines Minimal regulatory lag for LDC investments Long-term contracts for pipeline investments Constructive regulatory jurisdictions Strong margin contribution from retail markets Solid balance sheet 24

25 Southern Company and AGL Resources Combined Profile Over 1,500 bcf per year of combined natural gas consumption and throughput volume Over $50B of projected regulated rate base (largest in industry) Approximately 9 million regulated utility customers in 9 states (2 nd largest in industry) $50B $44B $43B SO +GAS EXC + POM SO DUK NEE + HE SO + GAS Retail Regulated Rate Base (2014 company filings) $32B $28B $27B $22B EXC + POM SRE DUK AEP NEE + HE $17B $7B $7B $5B $5B AEP D ETR NI SRE GAS ATO Utility Customers (2014 in millions) SO GAS NI D ATO ETR 25

26 Appendix

27 2015 Outlook Economic Roundtable Expected 2015 Sales Growth GDP projected growth of around 2.5% Industrial activity will continue to improve, but constrained by strengthening dollar and low oil prices and weakness in export demand 1.0% 1.4% 1.7% 1.3% Improving housing market lead by multifamily construction and consumer spending could offset headwinds Global economy expected to remain sluggish Residential Commercial Industrial Total Retail Sales 27

28 Q Retail Sales Growth vs. Prior Year Residential Commercial Industrial Total Retail Sales As Reported 2 nd Quarter Weather Normal* 4.6% 1.2% 2.3% 0.7% 0.1% 0.2% 2.2% 0.7% Year-to-date June As Reported Weather Normal* -0.2% 0.7% 0.7% 0.7% 1.0% 1.1% 0.5% 0.8% First time since 2004 with growth across all customer classes in consecutive quarters Residential customer growth outpacing budget and prior year Significant vacancy rate improvements in Atlanta commercial office space Industrial growth continues to moderate due to a strong dollar and weak export demand *Also reflects adjustment of 2014 KWH sales consistent with Mississippi Power s updated methodology to estimate the unbilled revenue allocation among customer classes implemented in the first quarter

29 A Diverse Generation Fleet Benefits our Customers Resources (GWs of Capacity) 33 GW 50 GW 49 GW What We ve Used (GWHs of Energy) Future Flexibility (Depends on Fuel Prices) Low Gas High Gas Nuclear Hydro/Renew Nuclear Nuclear Converted Gas CTs Total Gas 2014: 45% 2020: 52% Gas Gas CCs Non-PRB Coal Total Coal 2014: 40% 2020: 29% Coal Coal PRB Coal Illustrative ranges based on assumed natural gas prices of $2/mmBtu (Low Gas Price) and $14/mmBtu (High Gas Price). Assumptions have been 29 selected to illustrate the Southern Company system s fuel flexibility and do not represent actual forecasts of future system fuel mix or natural gas prices

30 Generation Portfolio Diversity Capacity Factors Q2 YTD Coal - PRB 64% 63% 68% 61% Coal - Non-PRB 43% 34% 44% 30% Gas - Combined Cycle 60% 62% 58% 66% Energy Mix Q2 YTD Natural Gas 37% 43% 36% 45% Coal 42% 38% 43% 35% Nuclear 17% 15% 16% 16% Hydro/Other 4% 4% 5% 4% 30

31 $16.6B Capital Expenditure Forecast for 2015 to 2017 (excludes any capital expenditures for AGL Resources) Traditional OpCos $13.5B So Power Placeholders for Growth Southern Power Base Environmental New Generation Transmission Distribution Generation Maintenance Nuclear Fuel Other '15-'17 $1.2B $1.9B $2.2B $2.6B $1.7B $2.6B $2.5B $0.8B $1.0B Notes: Totals may not add due to rounding 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. Southern Power Base includes $1.3B & $0.3B of identified growth projects in 2015 & 2016, respectively

32 Southern Company Project Security Issuances (3) as of September 4, 2015 ($ in millions) Issued Remaining Total Projected Projected Total Projected Debt Issuances Georgia DOE Loan $ 600 $ 400 $ 1,000 $ 450 $ 350 $ 1,800 Mississippi Bank Debt (1) $ 900 $ - $ 900 $ 900 $ - $ 1,800 Mississippi Securitization $ - $ - $ - $ - $ 1,000 $ 1,000 Capital Markets and Long Term Bank Needs Alabama $ 975 $ - $ 975 $ 500 $ 750 $ 2,225 Georgia (2) , ,955 Gulf Mississippi Southern Power 1, , ,900 Holding Company 1,000 1,000 2, ,500 Total Capital Markets $ 3,130 $ 1,600 $ 4,730 $ 2,400 $ 2,175 $ 9,305 Total Debt Issuances $ 4,630 $ 2,000 $ 6,630 $ 3,750 $ 3,525 $ 13,905 Common Equity Needs $ - $ - $ - $ - $ - $ - (1) Includes the extension or replacement of $775 million of existing bank debt in 2015 and $900 million in (2) Represents the reoffering of revenue bonds previously held by Georgia Power since (3) Excludes financing related to AGL Acquisition. 32

33 CapEx Forecast Company (totals may not add due to rounding) Total $billions '15-'17 Alabama $1.5 $1.1 $1.4 $4.0 Georgia $2.4 $2.4 $2.1 $6.9 Gulf $0.3 $0.2 $0.2 $0.7 Mississippi $1.0 $0.3 $0.2 $1.6 Other Subsidiaries $0.1 $0.1 $0.0 $0.2 Traditional OpCo Total $5.4 $4.2 $3.9 $13.5 Southern Power Base Southern Power Expansion Total Capex $6.8 $5.5 $4.3 $16.6 Note: Forecast does not reflect any capital expenditures for AGL Resources 33

34 CapEx Forecast (totals may not add due to rounding) 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 $1.4 $1.3 $0.4 $3.1 Total Capex $6.8 $5.5 $4.3 $16.6 Note: Forecast does not reflect any capital expenditures for AGL Resources 34