The Southern Company

Good afternoon. My name is Scott and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company fourth quarter 2022 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. I would now like to turn the call over to Mr. Scott Gamble, Vice President, Investor Relations and Treasurer. Please go ahead, sir.

Thank you, Scott. Good afternoon and welcome to Southern Company's year-end 2022 earnings call. Joining me today are Tom Fanning, Chairman, President, and Chief Executive Officer of Southern Company, and Dan Tucker, Chief Financial Officer. In addition, Georgia Power CEO Chris Womack, who will be succeeding Tom as President and CEO in the coming months, is also joining us. 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 Fanning.

Thank you, Scott. Good afternoon and thank you for joining us today. Southern Company had another exceptional year in 2022. As you can see from the materials that we released this morning, we reported strong adjusted earnings per share consistent with the very top of our guidance range. These results were due in no small part to the culmination of the hard work of thousands of people throughout our company to put in day in and day out to provide customers with clean, safe, reliable, and affordable energy. Our operations team, generation, fleet, and power delivery system worked exceedingly well in 2022, which included meeting an all-time peak load of over 41,000 megawatts in June and navigating well an extreme winter cold event over the Christmas weekend that pushed electric demand to a system peak load of nearly 38,000 megawatts, a December record. Our success with these events is a testament to the value of our vertically integrated state-regulated business model that delivers to our customers and the communities we are privileged to serve. A great example of the benefits which come from our state's long-term integrated planning processes is the 26% winter reserve margin factored into the capacity planning process. This winter reserve margin, which is significantly higher than typical summer reserve margin, inherently recognizes that peak demand in the winter occurs during the dark early morning hours when solar resources are diminished and cold temperatures can have unintended adverse effects on generation and fuel supply equipment. Such thoughtful planning assumptions along with robust winterization programs and a continuous focus on resilience investments are top of mind across all of our state regulated utilities. Let's turn now to an update on Vogel Units 3 and 4. Since our last call, the site team at Unit 3 has turned to testing and startup process in support of the unit's next major milestone, initial criticality. During this process, as disclosed in January, We identified vibrations associated with certain piping within the passive cooling system, which required additional time to remediate. The site team cooled down the unit and successfully remediated the vibrations, allowing them to resume the testing, which precedes initial criticality. During this work, we identified a few additional issues to address, consistent with our focus on optimal long-term performance, and getting it right, we've added some additional time to the Unit 3 schedule to address these items and to reduce the risks associated with other potential issues emerging. We now project placing Unit 3 in service in May or June of 2023. Turning now to Unit 4, substantial progress continued throughout the last quarter. We successfully completed cold hydro testing in early December. Electrical production and terminations through year-end were sustained at levels supportive of our year-end 2023 in-service objective. All required systems necessary to start hot functional testing on Unit 4 have been completed and turned over to the initial test program. Component and system testing activities are steadily increasing and are now critical path in support of the next major milestones for Unit 4, hot functional testing and fuel load. We have seen a marked improvement in testing results for Unit 4 compared to the Unit 3 process, which reflects the increased focus on first-time construction quality and timely documentation. Even with the improved results, somewhat slower than planned testing productivity, has consumed margin in our schedule. The site's working schedule continues to reflect a couple of months of remaining margin for a 2023 in-service date. After careful consideration and given our experience on Unit 3 and the degree of critical work ahead of us, we are further at risk adjusting our Unit 4 schedule to reflect a range of the projected in-service date between late fourth quarter of 2023 and the end of the first quarter of 2024. Turning now to cost, Georgia Power's share of the total project capital cost forecast reflects a projected increase of $201 million to fund the extension of Unit 3 and Unit 4 projected in-service dates to the end of the second quarter 2023 and to the end of the first quarter 2024, respectively, plus modest increases in the projected cost of resources to complete the remaining work and testing on Unit 4. As a result, Georgia Power recorded an after-tax charge of $150 million during the quarter. We've included project schedules for the next major milestones for each unit, including initial criticality for Unit 3, and the start of hot functional testing for Unit 4 in the materials provided for this call. Our priority remains bringing Vogel Units 3 and 4 online to provide Georgia with a reliable, carbon-free resource for the next 60 to 80 years. We will continue to take the time needed to get it right and will not sacrifice safety or quality to meet schedule. Dan, I'll turn the call over to you.