Good afternoon. My name is Malika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company Fourth Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. As a reminder, this conference is being recorded, February 15, 2024. I would now like to turn the conference over to Mr. Scott Gammill, Vice President, Investor Relations and Treasurer. Please go ahead, sir.

Thank you, Malika. Good afternoon, and welcome to Southern Company's fourth quarter 2023 earnings call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company; and Dan Tucker, Chief Financial Officer. Let me remind you, we'll be making forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent securities filings. In addition, we'll present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call, which are both available on our Investor Relations website. At this time, I'll turn it over to Chris.

Thank you, Scott. Good afternoon, and thank you for joining us today. 2023 was an exceptional year for Southern Company, a year in which we proved once again that we can do extraordinary things, including delivering strong financial results in the face of unprecedented headwinds and the successful completion of Plant Vogtle Unit 3, the first newly constructed nuclear unit in the United States in over three decades. Since its July 30th in-service date, Unit 3's performance has exceeded our expectations, delivering over 5 million megawatt hours of safe, reliable, carbon-free energy across Georgia. Other noteworthy items for 2023 included the constructive resolution of the Vogtle 3 and 4 prudence process, successfully completing construction and commissioning for a brand new 720-megawatt combined cycle plant at Alabama Power's plant Barry; acquiring two new solar projects at Southern Power, which once construction is complete, will add an additional 350-megawatts of carbon-free generation to our portfolio; and achieving a 49% reduction in greenhouse gas emissions in 2023, which is in line with our interim goal of a 50% reduction versus 2007 levels by 2030. We earned a National Accounts Award for outstanding customer engagement by the Edison Electric Institute and top honors from J.D. Power for residential and business customer satisfaction. And just last week, Southern Company was ranked as the number one most admired electric and gas utility in Fortune magazine's World's Most Admired Companies list for 2024. These achievements reflect our team's steadfast commitment to keeping the customers and the communities we serve at the center of everything we do. Throughout 2023, our electric and gas franchises continue to excel at the fundamentals and started this year strong, as evidenced through our preparations and execution during January's winter storm, Heather, when electricity demands reached all-time winter peaks. Our ability to navigate through such severe weather events further demonstrates how our customers benefit from our outstanding operational performance and the value of our vertically integrated state-regulated business model. Our long-term integrated planning processes, which include adopting important planning assumptions, benefit our customers by providing a reliable and resilient mix of energy resources. Before turning the call over to Dan for a financial update, I'd like to provide an update on Vogtle Unit 4. We continue to make meaningful progress toward the completion of Unit 4 with initial criticality achieved yesterday. As we approach the initial sync with the grid, Unit 4 continues with the remaining start-up and preoperational testing activities that precede the declaration of in service, projected in the second quarter of 2024. Our 2024 adjusted earnings per share guidance range, which Dan will detail shortly, assumes Unit 4 achieves commercial operation in April.

Thanks Chris and good afternoon everyone. As you can see from the materials we released this morning, we reported strong adjusted earnings per share of $3.65 for 2023, which was the very top of our 2023 guidance range. The primary drivers of our performance compared to 2022 are higher utility revenues and lower non-fuel O&M expenses and income taxes, somewhat offset by higher depreciation and interest expenses. Mild weather was also a significant headwind, with 2023 marking the mildest year in our history for our electric service territories. Our ability to deliver 2023 adjusted results at the very top of guidance is a testament to our team and to the resilience and strength of our portfolio of companies. A detailed reconciliation of our reported and adjusted results compared back to 2022 is included in today's release and earnings package. Turning now to electricity sales in the economy. Weather-adjusted retail electric sales were down 0.4% for 2023 compared to 2022. Strong usage drove commercial sales growth of 1.3% for the year, which was partially offset by lower residential usage with both commercial and residential sales impacted by the return to the office dynamic. We continue to see robust residential customer growth with the addition of over 46,000 residential electric customers and nearly 27,000 residential gas customers. Since 2020, we've added over 200,000 residential electric customers, which represents the highest four-year total in decades. Industrial sales finished down for the year nearly 2%, largely due to continued slowing in housing and construction-related sectors as well as lower sales to chemical companies due to outages and long-planned plant closures. Consistent with the drivers detailed in Georgia Power's recently filed 2023 Integrated Resource Plan update, economic development in our Southeast service territory remains incredibly strong. Several years of extraordinary success in attracting new and expanding businesses to our states underpin our long-term electricity sales forecast. While electricity sales growth is projected to remain around 1% to 2% for 2024 and 2025, growth from 2025 to 2028 is projected to accelerate to an average of approximately 6% annually, with Georgia Power's total retail electric sales growth projected to be approximately 9% annually over this same period. The magnitude and velocity of this growth are significant drivers for the increased capital investments reflected in our current outlook. This projected growth also represents a tremendous opportunity to de-risk our outlook and benefit customers, as this projected growth in kilowatt hour sales from new manufacturing facilities and data centers potentially puts downward pressure on existing customers' rates. Turning now to our earnings projections for 2024 and beyond. Our adjusted earnings per share guidance range for 2024 is $3.95 to $4.05, and our projected long-term adjusted EPS growth rate is 5% to 7% from that range. In early 2021, we provided the investment community with a stable post-Vogtle 3 and 4 construction and EPS projection, with an initial and reasonably wide 2024 guidance range. It is perhaps the greatest understatement to say that the world has changed a lot since early 2021. On a macro basis, we've seen significant inflation and higher interest rates, which alone has translated to interest expense for 2024 being hundreds of millions of dollars higher than any of us assumed three years ago. Additionally, the projected in-service date for Vogtle 4 moved into 2024 from 2023. In the face of these challenges, we've continued to work extremely hard to grow our business and create value for investors. Compared to our projections in early 2021, our state-regulated utility rate base for 2024 is projected to be approximately $6 billion higher, while lower O&M expenses and higher sales are projected to contribute hundreds of millions of dollars more than previously projected to help maintain affordability and help pay for those investments. We estimate adjusted earnings of $0.90 per share for the first quarter of 2024. Our capital investment plan continues to be well over 95% attributable to our state-regulated utility businesses. The current five-year capital investment forecast, totaling $48 billion, reflects a $5 billion increase in state-regulated utility investments relative to our forecast a year ago. This 12% increase in capital spending reflects our ongoing efforts to further increase the resiliency of our electric and gas networks and our technology infrastructure. While the increases in this year's five-year forecast represent an outsized upward adjustment due to the scale and velocity of the projected growth in the near-term, we do believe it's reasonable to expect a historical trend of capital increases to continue going forward. Our capital investment forecast of $48 billion supports annualized state-regulated rate base growth of approximately 6%, providing a solid foundation for our long-term outlook. Strong investment-grade credit ratings remain a priority. We continue to believe that in order to be a high-quality equity investment, a company must also have high-quality credit. As we near completion of Vogtle Unit 4, the reduction in major project construction risk and improvement in our free cash flow should strengthen and materially improve our credit profile to help ensure we preserve what we believe will be a positively differentiated profile. We are also turning on our internal equity plans to fund the incremental capital investment at our subsidiaries that I highlighted earlier. These plans typically provide approximately $350 million of new equity annually. Additionally, we'll preserve our financing flexibility and optionality with a continuous focus on preserving and improving shareholder value. For example, we will continue to maintain an at-the-market or ATM plan to partially finance potential additional increases in capital spending in our subsidiaries or potentially to partially refinance callable hybrid securities, if we determine doing so preserves or improves our credit and long-term EPS objectives. Southern Company strives to deliver a superior risk-adjusted total shareholder return, and we believe the plan that we've laid out supports that objective.

Thank you, Dan. Again, let me say, Southern Company had an exceptional year in 2023. We didn't just meet challenges head on; we rose above them while remaining committed to keeping customers and communities at the center of everything we do. I am extraordinarily proud of the hard work, the collaboration, the perseverance and the leadership that our teams showed throughout the year to enable us to achieve these outstanding results. For decades, Southern Company has prioritized investing in our people, with a focus on positioning our leaders and their teams to provide the exceptional service customers expect and deliver the innovative solutions needed in an evolving energy landscape. As you all know, our company implemented a leadership transition in early 2023. Rather than simply fill a handful of vacant seats, we embraced it as a grand opportunity. During 2023, we facilitated 75 officer level changes throughout the company. The changes brought renewed energy and excitement, and the movement served to further strengthen what we believe to be the deepest and best bench in the industry. I am excited about the future of this company and I'm excited about our team and its ability to deliver the results our stakeholders expect.

Thank you. Our first phone question is from the line of Shar Pourreza with Guggenheim Partners. Please go ahead. Your line is open.

Hey, Chris and Dan. Good afternoon. Just quickly on the new guidance that you rolled forward. Does the new 2024 estimate range still include a Vogtle charge? So should we be adding back $0.05 or so to grow off the 5% to 7% like you've talked about in the past? And sort of that new 6% rate base growth estimate now comes with equity, I guess, what's the comfort level of hitting the midpoint of that EPS growth range, which you just reiterated? Thanks.

Yes. Thanks for the question, Shar. I know there's a lot of focus on this. I think we're always fascinated with the precision with which everyone wants to inhale all this down. So let's start with the guidance range. Yes, I think it absolutely includes impacts from Vogtle 4, not only being in 2024 at all, but certainly going into April. I mean, if you add all that up, that's $0.08 of incremental impact on 2024 relative to what it would have been if the project had been online in 2023. But we haven't adjusted the range by that full amount, by any means. And what we're doing is using the flexibility, not unlike what we did in 2023 with the mildest year ever to kind of mitigate that. Those are the kind of mitigations and flexibility items that aren't necessarily available every year. You have to maintain the system and prioritize service to customers. And so that flexibility is limited. We're using it this year, and that will diminish what we have the opportunity to do going forward. I think what's not factored in is a couple of other important nuances. We thought 40 slides were enough, but maybe we needed one more slide to kind of draw how we always think about our guidance range and our growth range. We don't think about the 5% to 7% being off the midpoint. We've always kind of drawn those trajectories off the top and off the bottom. So 7% off the top, 5% off the bottom. I think if you do that from this current range, it captures every reasonable estimate that's out there for 2025 and 2026. When it comes to the rate base growth, look, we were at 6% last year. We just added $5 billion of capital to the plan. We didn't add all the capital that we see as possible. That kind of incremental capital additions opportunity still exists. So yeah, our ability to grow rate base and hit our numbers is as solid as it's ever been.

Got it. Okay. That's helpful, Dan. And then just lastly, I know one of your peers has spoken pretty extensively on nuclear PTCs and obviously expects to receive hundreds of millions of dollars a year to fund that capital plan. I guess, does the plan today expect to receive anything material on the nuclear PTC fund? Is it part of any of your credit metrics or funding plans? Thanks.

Yes, thanks, Shar. We have not factored any cash flow from nuclear PTCs into our outlook. We've got a terrific plan with an improving free cash flow to debt metric that's several hundred basis points above any of our thresholds over time, and frankly, improves every year in the forecast that I look at without those nuclear PTCs. Is there the opportunity for us to capture some of those PTCs? We think there very well could be. We're not counting on it, and to the extent we do, we'll flow those to customers to the most practical amount of time possible. So it's not going to be a factor in our metrics or earnings.

Thanks, Shar.

Thank you. Our next question is from the line of Steve Fleishman with Wolfe Research. Please go ahead. Your line is open now.

Hi, good afternoon. Chris, Dan, you've mentioned targeting a 17% free cash flow to debt, which is unique. When do you anticipate reaching that goal, possibly in 2025 when you have your first full year of bulk units operational? When do you expect to achieve it?

Yeah. So I've always kind of said we see a forecast that gets us to 17-ish, it's the way I've characterized it in the past. So let me tell you where we are, Steve, here today, and I think it's still differentiated and a terrific story. So if we just think about Moody's metrics, our actual result for 2023 was 14%. Keep in mind, that's before Vogtle 4 is in service. In 2024, with Vogtle in service on the timeline, we believe those metrics will improve by more than 100 basis points in 2024. The weight of the incremental capital that we're deploying and the fact that some of this is kind of long-live construction, you think about building new gas plants in Georgia or other things, there's a bit of regulatory lag that weighs a little bit on credit metrics. As that resolves itself, cash flow improves. So with the forecast that I see, we go from 14 to over 15 in 2024, and about a 50 to 60 basis point improvement every year after that over time. It's a function of that incremental capital. And then there's a little bit of impact in the short-term for under-recovered fuel that as that gets collected and the debt goes away, that also adds to that upward trajectory. So in my five-year forecast, we get to kind of mid-16 towards 17 range, and every year is an improving story, still hundreds of basis points above our thresholds.

Great. Thanks. My other question, just can you talk to this growth, particularly, I guess, in Georgia, the 9% a year sales growth, which seems unprecedented? How are you differentiating proposed growth projects between ones that are in your plan or ones that you're holding back from because you're not sure they're going to happen? Is this a conservative risk-adjusted number? How are you doing it against your peers because it's so huge?

Yes, our growth is unprecedented. We continue to witness economic development activities, and so yeah, this is a very conservative look. We consider build permits in terms of actual announcements of ground has been broken. We look at not just companies that are forward-looking and make site visits, but there's been some demonstrated commitment that they will, in fact, be building a project in the state. We go through those thresholds before making our filings to have some certainty that these projects are real. But as we go to the commission for this updated IRP, we've factored in those companies and businesses that have clearly demonstrated taking actions that show some firmness in their participation.

I want to emphasize that the momentum in economic development activities has persisted even after we filed the 2023 Integrated Resource Plan update. Thankfully, we have another filing coming in 2025, and this process is ongoing. It will continue to evolve. There are still many factors that we are being cautious about, and while we are not counting on them yet, they are certainly possible.

The 9% since everybody is very focused on data center growth, how much of it is data centers relative to manufacturing or other growth?

Data centers represent right now, we think, somewhere around 80% of that emerging load.

Hey good afternoon and thanks for taking the questions. Maybe just to start on the new five-year plan. Could you talk a little bit about what drove the assumptions you made around including some of that spend on the incremental resource needs in the Georgia IRP? And then with the commission order expected there in April, how would you think about updating the capital plan if it's necessary after that decision?

Yes, Carly, it's a great question. The velocity and magnitude of this growth is right in front of us. These resources are needed sooner rather than later. We were very specific in what we included; if you go back and look at the proposal that Georgia Power put in front of the commission back in the fall, it included several owned resources. What we've included in the capital plan are the new combustion turbines and some specific storage projects. We will get a decision in April; there may be further clarity coming out in 2025. We will continue to keep the investment community apprised and update our projections accordingly.

Great. Thank you for that. That’s super helpful. And then maybe just as we think about executing on Vogtle Unit 4. Any insights on the near-term milestones that we might get updates on that we can gauge project progress there? And to the extent that timeline does slip beyond the April that's embedded into current guidance, can you talk a little bit about some of the levers that you might have to pull to offset those impacts?

Yes, Carly, with initial criticality achieved yesterday, we continue to progress through testing and start-up. The next major milestone is syncing to the grid, and that could occur later this month. We expect Unit 4 completion during the second quarter. As we consider the experiences we gained from Unit 3, we approach Unit 4 with that knowledge and ensure we're taking time to get it right.

Yes, Carly, just to speak to the flexibility. We've already deployed some of that flexibility to address what we expect to be our April in service. It's roughly $0.03 for every month. But that’s part of why we have a range. It could be a function of moving us within the range for the year or depending on circumstances as the year plays out.

Hey, good afternoon. Thank you so much for your time. Just on this big sales growth number, are you seeing an improving ROE in the outlook? Or is this underpinned at this point by just the IRP? Is there something more to go as you work through the process?

Certainly, not improving returns from an overall perspective. We're really viewing this as an opportunity to reduce pressure on existing customers' rates. In terms of sales growth, we believe it reinforces the underlying strength of our IRP update. It's not a huge differential.

Hi, everybody. With Vogtle's COD targeted for April freeing up some management attention, do you see any meaningful opportunities to reduce O&M spending below the current guidance as time progresses?

No, we should always look across our hand and find ways to be more efficient. We're continuously and proactively focused on finding ways to reduce O&M expenses and being more efficient to drive those costs down. And fuel pricing is a key factor we consider as well.

All the costs associated with completing Vogtle 3 and 4 are a capital cost, not O&M costs, and thus are not an opportunity to reduce.

Okay. What's the peak hour load growth forecast in Georgia? How much lower is that than the total kilowatt hour growth number? Are there limitations with supply chains that could constrain growth opportunities via the IRP process?

On supply chain, we are in terrific shape, given our scale. Regarding your peak question, we'll have to follow up with you on that, Ryan. Connect with the Investor Relations team for more details.

Just to clarify, if you were not to get the higher growth rate in sales after 2025, would that have an impact on your 5% to 7% growth target?

No, it would not change our outlook.

I know this question has been asked over and over, but it's hard to believe that the load growth is not having a bigger impact on your earnings growth. Is it just because the interest expense drag is so pronounced that it absorbs the help that you're getting from higher load growth?

Yes, our earnings reflect the relationship between load growth and capital investment serving peak demand. Our focus remains on balancing investments with customer growth while maintaining a strong financial profile.

Thanks, everyone, for your questions. We appreciate your interest in Southern Company and look forward to an exciting future as we continue building for our customers and communities.

Thank you. This concludes the Southern Company fourth quarter 2023 earnings call. You may now disconnect. Have a good day.