The Southern Company

Good afternoon. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Southern Company fourth quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to register for a question, please press the one followed by the four on your telephone. I would now like to turn the call over to Mr. Scott Gamble, Investor Relations Director. Please go ahead, sir.

Thank you, Chris. Good afternoon and welcome to Southern Company's year-end 2021 earnings call. Joining me today are Tom Fanning, Chairman, President, and Chief Executive Officer of Southern Company, and Dan Sucker, 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, Form 10-Qs, and subsequent filings. In addition, we will 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 investor.southerncompany.com. At this time, I'll turn the call over to Tom.

Thank you, Scott. Good afternoon, and thank you for joining us today. As you can see from the materials that we released this morning, we reported strong adjusted earnings per share for 2021, exceeding both our original 2021 guidance and the estimate that we provided on our third quarter call. This performance is due in no small part to our outstanding service territories and the unparalleled commitment of our employees to deliver clean, safe, reliable, and affordable energy to our customers. Our outstanding customer service, our commitment to the communities we serve, and our proactive engagement with our stakeholders are reflected in the numerous honors we've highlighted in our slide deck. including recent recognition as number two in the nation on Forbes' 2022 list of America's best large employers. Many of the initiatives that support this distinction are reflected in our inaugural transformation report, which we released earlier this week. This report details our sustained commitment and actions to further advance equity both within our company and our communities. These commitments allow Southern companies to help lead change within our communities and provide an enduring reflection of our values. We are proud of the progress we have made and continue to recognize the opportunity to do more. As an example of the work we're doing to drive our customer satisfaction results, a meaningful portion of our capital plans in recent years has been allocated to the continued modernization of our electric grids. Our grid automation strategies and investments are delivering real value to customers, and in 2021, our customers experienced 15% fewer minutes of interruptions. Similar initiatives will continue to be a major component of our capital plans going forward. Across all of our stakeholder groups, including employees, customers, communities, and investors, we're focused on sustainability and a long-term view of value. That objective remains sound. The long-term financial plan that we outlined for you last year remains intact, and we are reaffirming our 5% to 7% long-term growth rate expectation consistent with adjusted earnings per share and in a range of $4 to $4.30 in 2024. Let's now turn to an update regarding some of the recent developments related to our progress on Plant Vogel Units 3 and 4. As you can see in the materials provided earlier today, we updated our expected completion timeline for both units, extending the in-service date for each unit by three to six months. As we discussed on previous calls, the paper process is a critical aspect of turning plant components and systems over from construction to testing and operations. We have discovered incomplete and missing inspection records concerning much of the materials and equipment that have been installed at Unit 3. These inspection records are an important part of the documentation that is necessary to file ITACs. Our progress on Unit 3 ITACs has slowed as we address a backlog of tens of thousands of inspection records needing completion to support system turnovers. Through hard work over the last several weeks, we have reduced this backlog by more than 30%. Documentation within these inspection records is a critical aspect of getting it right, and the time and resources to complete the remaining inspection records and remediate construction issues identified in the process, including the impact of borrowing Unit 4 resources, are key drivers for the change in schedule. We have 123 ITACs remaining for Unit 3. The revised ITAC completion schedule we've included in our slide deck is consistent with a three-month change in the Unit 3 schedule. Over the past year, a number of challenges, including shortcomings in construction and documentation quality, have continued to emerge, adding to project timelines and cost. In recognition of the possibility for new challenges to emerge, We further risk adjusted our current forecast by establishing a range of three to six additional months for each unit, and we've reserved for the maximum amount. We continue to make meaningful progress on both units, notably for unit three, all 157 fuel assemblies have been loaded into the spent fuel pool in preparation for fuel load. For unit four, Direct construction is now approximately 92% complete. Open vessel testing has started, and we recently completed the structural integrity and integrated leak rate tests without issue. The aforementioned challenges on Unit 3 are serving as lessons learned for Unit 4 and have benefited our performance on Unit 4 to date relative to Unit 3. First-time quality on both construction and documentation are key areas of focus. Our priority is bringing Vogel Units 3 and 4 safely online, and again, to get it right, to provide Georgia with a reliable, carbon-free energy resource for the next 60 to 80 years. With this most recent change in project cost and schedule, Provisions in the Vogel 3 and 4 co-owner agreement came to the forefront, requiring the owners to affirmatively vote to proceed with the project. Vogel 3 and 4 is incredibly important to the state of Georgia and its robust, growing economy. Furthermore, the addition of 2,000 megawatts of baseload carbon-free energy is vital to increasing the availability of net zero energy resources across the state. Considering the facts and our proximity to commercial operation, Georgia Power has already voted to proceed. The other owners are required to vote by March 8th, which allows time for them to work through their own governance processes. Consistent with a schedule extension of up to six months additional for each unit, Georgia Power's share of the total project capital cost forecast increased by $480 million, largely as a function of time, additional resources to complete the remaining work with the necessary focus on quality construction and documentation and the replenishment of contingency. We continue working constructively with our co-owners to resolve differing interpretations of the cost-sharing agreement with an expected potential range of outcomes of $100 million to $900 million. We have included $440 million of the $900 million in our total project cost estimate. In aggregate, Georgia Power's resulting total capital cost forecast is $920 million, and as a result, Georgia Power recorded an after-tax charge of $686 million during the fourth quarter. We value our partners on Vogel 3 and 4 and the relationship we've had with them across multiple assets for decades. We look forward to our continued partnership on each new unit as they transition to commercial operation, providing millions of Georgians with clean, safe, reliable, and affordable electricity for decades to come. Before turning the call over to Dan for an update on our 2021 financial performance and our long-term outlook, I'd like to briefly touch on Georgia Power's Triennial Integrated Resource Plan, or IRP, which was filed with the Georgia Public Service Commission late last month. The proposed plan sets forth a proactive, innovative, and transformational roadmap for how Georgia Power expects to support customers in its growing service territory for decades to come. Consistent with Southern Company's path to net zero carbon emissions, the plan describes a tangible path to transition Georgia Power's generating fleet to cleaner, more economical resources. This plan includes retirement of all of the coal units Georgia Power controls by 2028, except for Plant Bowen Units 3 and 4, which are scheduled to be retired no later than 2035. The plan also includes a request for the addition of 6,000 megawatts of renewable generation by 2035, more than doubling Georgia Power's current renewable resources. Additionally, 1,000 megawatts of storage is requested by 2030 to improve the capacity value of these intermittent resources. In recognition of the changing energy landscape, Georgia Power proposed innovative programs to promote reliability and resilience, including a distributed energy resource program. The comprehensive long-term plan also addresses continued investment in our transmission system and energy efficiency programs for customers. The IRP is subject to the review and approval of the Georgia Public Service Commission. Hearings will take place during the first half of 2021 with a final decision due this summer. Dan, I'll turn the call over now to you. Please take it away.