Southern Company(SO) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the company and its subsidiaries Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for The Southern Company and its subsidiary registrants for the quarterly period ended June 30, 2025, including statements of income, comprehensive income, cash flows, balance sheets, and stockholders' equity for the parent company and each major subsidiary, followed by combined notes to these statements The Southern Company and Subsidiary Companies Financial Statements The Southern Company Consolidated Financial Highlights (in millions, except per share data) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $6,973 | $6,463 | $14,748 | $13,109 | | Operating Income | $1,764 | $1,939 | $3,774 | $3,642 | | Net Income Attributable to Southern Co. | $880 | $1,203 | $2,214 | $2,332 | | Diluted EPS | $0.79 | $1.09 | $2.00 | $2.12 | | Net Cash from Operating Activities | N/A | N/A | $3,431 | $3,999 | - Total assets increased to $148.85 billion as of June 30, 2025, from $145.18 billion at December 31, 2024, primarily driven by an increase in Property, Plant, and Equipment[28] - Total long-term debt increased to $63.0 billion as of June 30, 2025, compared to $58.8 billion at the end of 2024[30] Alabama Power Company Financial Statements Alabama Power Financial Highlights (in millions) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $1,968 | $1,873 | $3,980 | $3,664 | | Operating Income | $547 | $536 | $1,086 | $1,009 | | Net Income | $381 | $369 | $755 | $702 | | Net Cash from Operating Activities | N/A | N/A | $678 | $877 | Georgia Power Company Financial Statements Georgia Power Financial Highlights (in millions) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $3,110 | $2,875 | $6,148 | $5,273 | | Operating Income | $927 | $1,052 | $1,707 | $1,653 | | Net Income | $607 | $762 | $1,204 | $1,199 | | Net Cash from Operating Activities | N/A | N/A | $1,335 | $1,680 | Mississippi Power Company Financial Statements Mississippi Power Financial Highlights (in millions) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $400 | $364 | $821 | $706 | | Operating Income | $87 | $85 | $172 | $150 | | Net Income | $59 | $61 | $114 | $111 | | Net Cash from Operating Activities | N/A | N/A | $78 | $85 | Southern Power Company and Subsidiary Companies Financial Statements Southern Power Financial Highlights (in millions) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $546 | $524 | $1,113 | $997 | | Operating Income | $43 | $111 | $88 | $161 | | Net Income Attributable to Southern Power | $51 | $86 | $138 | $182 | | Net Cash from Operating Activities | N/A | N/A | $232 | $230 | Southern Company Gas and Subsidiary Companies Financial Statements Southern Company Gas Financial Highlights (in millions) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $979 | $831 | $2,818 | $2,538 | | Operating Income | $190 | $180 | $773 | $747 | | Net Income | $106 | $108 | $524 | $517 | | Net Cash from Operating Activities | N/A | N/A | $1,210 | $1,270 | Combined Notes to the Condensed Financial Statements - Regulatory: Georgia Power's Alternate Rate Plan (ARP) was extended through 2028, and the company requested certification for new generation and battery storage projects totaling approximately $16.7 billion[124][130] - Contingencies: A class action complaint was filed against Southern Company and other nuclear operators alleging conspiracy to fix employee compensation, while a separate False Claims Act lawsuit related to DOE grants for the Kemper facility is ongoing[154][155] - Financing: In May 2025, Southern Company issued $1.65 billion in convertible senior notes and used a portion of the proceeds to repurchase approximately $1.11 billion of older convertible notes, resulting in a $129 million loss on extinguishment of debt[195] - Income Taxes: Unrecognized tax positions for Southern Company increased significantly to $382 million, primarily related to the ability of Alabama Power and Georgia Power to meet prevailing wage requirements for existing zero-emission nuclear power Production Tax Credits (PTCs)[220] - Acquisitions & Dispositions: Mississippi Power completed the acquisition of FP&L's 50% interest in Plant Daniel Units 1 and 2, and Southern Power is continuing construction on the Millers Branch solar facility and several wind repowering projects[277][278][280] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the second quarter and first half of 2025, comparing them to the same periods in 2024, covering all major segments, detailing drivers for changes in revenue, expenses, and net income, and addressing future earnings potential, financial condition, liquidity, capital requirements, and financing activities Results of Operations - Southern Company (Consolidated): Q2 2025 net income decreased to $880 million from $1.2 billion in Q2 2024, primarily due to higher non-fuel O&M, depreciation, interest expense (including a $129 million debt extinguishment loss), and taxes, partially offset by higher retail electric and natural gas revenues[325][326][354] - Alabama Power: Q2 2025 net income increased to $381 million from $369 million year-over-year, driven by higher retail revenues from rates and customer usage, which offset increased non-fuel O&M expenses[360] - Georgia Power: Q2 2025 net income fell to $607 million from $762 million in Q2 2024, caused by higher O&M expenses (partly due to a prior-year asset sale gain), increased depreciation, and weather impacts, partially offset by higher base tariff revenues and the inclusion of Plant Vogtle Unit 4 in rates[385][386] - Southern Power: Q2 2025 net income decreased to $51 million from $86 million year-over-year, mainly due to $42 million in accelerated depreciation for wind repowering projects and higher scheduled outage expenses[437][453] - Southern Company Gas: Q2 2025 net income was relatively flat at $106 million compared to $108 million in Q2 2024, as increased income from gas distribution operations was offset by lower earnings from gas pipeline investments[460] Future Earnings Potential - Future earnings are influenced by constructive regulatory environments, recovery of increasing costs, and projected long-term demand growth, particularly from data centers and industrial activity[486][489] - The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, restricts ITCs and PTCs for new solar and wind projects, requiring them to begin construction by July 2026 or be operational by the end of 2027 to qualify[516] - Alabama Power and Georgia Power expect to claim zero-emission nuclear power production tax credits (§45U PTCs) for 2024, with a base credit of $75 million for Southern Co., potentially increasing to $373 million if prevailing wage requirements are met[518] - Southern Power's wind repowering projects are expected to result in significant accelerated depreciation: approximately $215 million in 2025, $320 million in 2026, and $25 million in 2027[512] Financial Condition and Liquidity - The company maintains a stable financial condition, with the Southern Company system having $8.9 billion in unused committed credit arrangements available for liquidity as of June 30, 2025[522][534] - Significant future cash requirements include Georgia Power's newly requested projects, with estimated capital expenditures of $14.3 billion through 2029[526] Net Cash Flow Summary - YTD 2025 vs YTD 2024 (in millions) | Registrant | Operating Activities 2025 | Operating Activities 2024 | Investing Activities 2025 | Investing Activities 2024 | Financing Activities 2025 | Financing Activities 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Southern Company | $3,431 | $3,999 | $(5,734) | $(4,222) | $2,467 | $513 | | Alabama Power | $678 | $877 | $(1,169) | $(951) | $300 | $(46) | | Georgia Power | $1,335 | $1,680 | $(3,218) | $(2,199) | $1,859 | $551 | | Mississippi Power | $78 | $85 | $(145) | $(218) | $76 | $114 | | Southern Power | $232 | $230 | $(418) | $(127) | $161 | $(85) | | Southern Co. Gas | $1,210 | $1,270 | $(735) | $(696) | $(294) | $(574) | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes to its disclosures about market risk during the six months ended June 30, 2025, referring to the more detailed discussion in its Annual Report on Form 10-K - There were no material changes to the market risk disclosures for Southern Company or its subsidiaries during the six months ended June 30, 2025[581] Item 4. Controls and Procedures Management, including the CEO and CFO of each registrant, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes made to internal control over financial reporting during the second quarter of 2025 - Management concluded that disclosure controls and procedures for each registrant are effective as of the end of the period[582] - No changes in internal control over financial reporting occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[584] PART II—OTHER INFORMATION This section covers legal proceedings, risk factors, other disclosures, and required exhibits Item 1. Legal Proceedings This section refers to the Notes to the Condensed Financial Statements for information regarding legal and administrative proceedings and states that the disclosure threshold for material environmental legal proceedings involving a governmental authority is $1 million - Information regarding legal proceedings is contained within the Notes to the Condensed Financial Statements[586] Item 1A. Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the Form 10-K[587] Item 5. Other Information This section discloses the adoption of a Rule 10b5-1 trading arrangement by one of Southern Company's executive officers during the second quarter of 2025 - Bryan D. Anderson, Executive Vice President, adopted a Rule 10b5-1 trading plan on May 30, 2025, covering the sale of 6,206 shares of common stock, with an expiration date of September 30, 2026[589] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and interactive data files in XBRL format - Exhibits filed include Section 302 and Section 906 certifications, as well as Interactive Data Files (XBRL)[590][601][603]