Q1 2020 Earnings Call

We continue to stand by your call will be get momentarily. We thank you for your patience and ask you. Please remain on the line.

[music].

[noise]. Good morning, My name is Nelson and I'll be your conference operator today.

At this time I would like to welcome everyone to southern company's first quarter 2000, <unk> earnings call. All white, please I'm used to prevent any background noise.

After the speaker's remarks, there'll be a question answer session.

[music] at that time, if it's a question came across the one off with a four on your telephone.

We can operator at any time, you make press the star followed by the zero.

And your telephone keypad.

Today's call is being reported Thursday April Thirtyth 2020.

I would now like turn the call over to Mr., Scott <unk> Investor Relations Director. Please go ahead Sir.

Thanks, Good afternoon, and welcome to Southern company's first quarter 2020 earnings call joining me today or Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company, and drew Evans Chief Financial Officer.

Let me remind you will 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'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 Investor about Southern company Dotcom at this time up all over to Tom Fanning.

Good afternoon, and thank you all for joining us I hope that you're well.

As you can see from the materials. We released this morning, we wrote reported strong adjusted results for the first quarter ahead of our estimate.

<unk> solid start to the years, because it positions us well as we look to overcome short term sales impact from the Corona virus.

Drew will provide you with more detail in our financials momentarily. So I won't go ahead and turn to our current operating environment amid the Corona virus and then it.

But southern company, our top priority remains keeping every employee healthy and say Wow, we continue to provide clean safe reliable and affordable energy for our customers.

We were well prepared to quickly make necessary adjustments across our business activating incident response teams throughout the company in February.

We continue to execute cobot 19 pandemic plans for our business and today, our operational performance has been exceptional we have not experienced nor do we currently foresee supply chain disruptions for our utilities or our construction projects.

We often talk about the importance of the reliability and resiliency of our electric and natural gas infrastructure, which has delivered remarkably well during this time.

In face of Cobot 19, our biggest asset has really been the reliability and resiliency of our workforce.

On a thank our employees who have risen to every challenge.

We have been resourceful and rapidly procuring and deploying necessary protective equipment and implementing effective protocols to safeguard against the virus our operations in customer service teams have continued to work around the clock, we are finding solutions to effectively work and teams remotely.

And we are communicating with our workforce and external stakeholders in a whole new way.

We've implemented a wide range of projects to support the physical financial and emotional wellbeing of our employees. During this time as they continue their superb work to support the operations of our company.

There's also a hallmark of our company to be a citizen wherever we serve so we have worked to identify how we can best assessed our communities during these difficult time.

Southern and its subsidiaries are targeting a commitment of nearly $10 million and financial <unk>, I'm, sorry, and foundation and charitable contribution and our employees have lot of thousands of volunteer hours to assist those impacted by the Corona virus pandemic.

I expect we will do even more in the coming month.

Let's turn down to an update on plant Vogel units three and four we remain focused on meeting the November 21 in November 2022 regulatory approved in service date.

And we continue to maintain an aggressive work plan onsite as a tool to help position us to meet those date.

Recall in February we refined the aggressive site work plan to reflect a may 2021 completion target for unit three and a March 2022 completion target for unit four we also laid out a november benchmark schedule and real.

Related milestones for unit three.

Through March.

Production for unit three was generally consistent with the refined aggressive site work plan.

April's performance was challenged due to covert 19 impacts, which put us slightly behind the aggressive site work plan.

Despite these challenges today direct construction is approximately 90% complete.

And notably just late breaking news, we have just completed open vessel testing.

That came in about one P.M. today.

We also reached several interim construction milestones for unit four during the quarter, including the installation of the polar crane and setting that containment vessel top hat.

Before giving an update on recent productivity I want to highlight our commitment to the safety of our workforce onsite and the surrounding community.

Since the beginning of the pandemic, we have taken a number of proactive measures intended to protect our workforce and the community against the spread of Cobot 19.

As we implement these measures we've engaged independent medical advisors to guide our actions to reduce the possible spread of the virus.

Among other measures we have provided additional protective equipment enhanced sanitation practices and implemented social distinct thing strategies, such as spreading out an increasing common areas eliminating group transportation at the site and mandating those who can tell her work to do so.

Beyond these basics early on our protocol onsite ensure that anyone tested and they're close contacts where promptly self isolated off site.

We acted quickly to build an onsite medical clinic designed to expedite test results minorite turnaround time for close proximity screening and improve facilitation of clearing personnel to return to work.

Throughout this time, we have remained in close consultation with the nuclear regulatory commission and the projects come owners as well as local and state authorities. We are also consulting with and monitoring other Mega project.

Notably last month, the president of the North American building trade unions commended southern company for going above and beyond the call of duty to keep their members on the bogo construction site safe and healthy.

Now turning to our recent progress.

Although overall monthly production through March was largely consistent with the refined aggressive site work plan.

Mechanical electrical and subcontract activities began to build a backlog. So unit three is aggressive site work plan at the end of March.

That trend was exacerbated through April as we began experiencing impacts across the site related to the current a virus pandemic, including an increase in workforce absenteeism.

Two weeks ago in an effort to mitigate the impact of code that 19.

We announced our intent to reduce density on the site and take workforce down by 20%.

As we work through this transition we expect to see a decrease in near term production similar to the Sawtooth effects that we have experienced in the past.

The longer term objective is to gain operational efficiencies and productivity by reducing workforce fatigue and absenteeism.

As we move ahead, we will continue to evaluate the effectiveness of our streamlined workforce.

As you know we regularly evaluate both cost and schedule and we have factored recent developments into our ongoing analysis.

Looking first at schedule, we are prioritizing key work fronts on units three and continue to work towards the aggressive site work plan targets some of which had been pushed back slightly in light of recent event.

The next major milestone for unit three is the start of Cold Hydro testing, which is currently plan to occur in the June to July timeframe.

Considering our expected timing on the start of cold Hydro testing.

We expect unit three hot functional testing to commence in the August September timeframe.

On the assumption that we are able to stabilize an increased productivity to pre pandemic levels. We are maintaining the aggressive site work plan target of year end for unit three fuel load.

As a reminder.

Construction completion of about 2% per month is consistent with the aggressive site work plan.

Taking into account our performance to date, we now project that we need to complete approximately 1% per month.

To meet the November benchmark schedule.

Now this is slightly down from the 1.3% we discussed last quarter.

Importantly, even amid the outbreak of the pandemic for April our construction completion rate was about 1.25%, which supports meeting the November 22021 regulatory approved in service date.

Critical areas of focus remain electrical and subcontract performance.

Lastly.

Consistent with the prioritization of units three and related staffing we have shifted the target completion date on the aggressive site work plan for unit for back to May 2022, which still provides six months a margin to the regulatory approved in service date.

Recall under the refined aggressive site work plan, we laid out in February we accelerated the target completion date for you to four by two months to March. So the current action takes us back to the prior date of May 2022.

Turning now to cost.

It's on our most recent assessment there is no change in the total project capital cost forecast.

In the first quarter of 2020, Georgia power allocated an additional 66 million of its project contingency, reflecting cost risks associated with construction productivity field support subcontractor and procurement as well as the impacts of the April 2020 reduction.

In workforce.

Recall, the estimated cost of time between the aggressive site work plan and the regulatory approved November in service date or a schedule cost margin is embedded in Georgia power base capital forecast.

With this quarter's contingency allocation the schedule cost margin and the remaining costs contingency combined continue to represent approximately 20% of the remaining estimated cost to complete.

As we have said, we expect to utilize the entirety of the contingency fund as we progress towards the completion of the project.

The team at Vogel units, three and four have worked incredibly hard to create an environment at the site that has led to meaningful progress over the past few months, even while managing through this unprecedented pandemic. The next few months will be pivotal as we adjust to a smaller more streamlined workforce and see to improve.

Productivity the safety of our workforce in the surrounding community remains Paramount and we will continue to guide our decision making at the site.

Importantly, we still expect to meet the November regulatory approved in service dates for both units three and four.

Drew I'll turn it over now to you for an update on our financial and our outlook.

Good afternoon, everybody I hope you all are well as Tom mentioned, we had a very strong start the year first quarter adjusted EPS was 78.

Which is eight cents higher than last year, and six cents above our estimate for the quarter.

Primary driver compared to last year constructive state regulatory actions, which were completed in 2019 at our facility.

In addition through aggressive cost control, we were able to decrease non fuel.

Every year, which helped us over almost 10 cents impact from warmer than normal weather than first quarter.

Detailed reconciliation of our reported an adjusted results is included in today's release and earnings.

Weather normalized retail sales for the first quarter 2020 were up slightly compared to last year led by our residential customer class with only modest impact from close to 19 evident in the last two weeks for the quarter.

We added over 20000, new electric and natural gas customers across the system, which is consistent with our expectation.

With that team top of mind, let's go ahead for our assessment of potential to the assessment of potential.

Yes.

Well, we did not meaningful earnings impact.

In the first quarter, we are continually assessing potential financial impacts on our business.

Tom would you not.

On a virus impact to materially affect our long term.

Our expected long term EPS growth rate remains 4% to 6%.

$40 billion five your capital investment plan is unchanged.

Did not see a need to issue equity.

Or.

Liquidity strong good access to capital market at both the parent and our subsidiary.

And with last weeks announcement of an eighth annual dividend increase the 19th consecutive annual increase we continue to demonstrate our commitment to enhancing shareholder value.

As we think about the potential near.

Term impacts.

Team on our 2020 expectations are key focus areas, our sale bad debt expense and liquidity.

Just a moment on the switch microphone.

Okay.

Starting with sales as I mentioned weather normalized retail sales were up slightly for the first quarter, largely reflecting higher residential demand.

Mark.

Well begin teleworking.

Thus far in April total estimated weather normalized electric retail demand is lower than our forecast by approximately 8%.

So equal those are historically volatile customers, we see heating cooling we've seen demand stabilized.

Yes.

I was over the last few weeks.

We will continue to closely monitor Fran.

This is within our state you guys Unreal.

Looking ahead.

Current forecast for the 2000.

For 2020.

Economic recovery.

Request, a mid summer phase out the stable policies with model.

Well service territory over the balance of the year.

Using these assumptions our projection in Asia overall decline retail sale.

Year range, 5% on weather normalized.

With residential up one to three person.

Well down, 510% and industrial down 8%.

As a reminder, our electric sales mix is split about for for across each customer class.

Retail sales in these ranges with lower total non-GAAP revenue.

The 250, so $400 million all these days.

We plan to mitigate these impacts.

Continuing to aggressively managed.

Throughout remainder here.

While the current situation.

We demonstrated a similar level off.

In response to 2002, 2008, 2009 session, which gives us confidence in our ability to deliver will earn arm.

Of course actual impact will be highly dependent on the duration of stable policies in the pace.

However, as visibility this improves we will hold our expectation around appropriate low cost control.

At this time, we do not anticipate sales organization.

Okay.

On southern power.

Yes.

The long term contracted nature of our business, Paul we expected largely insulated and Jim.

Southern company gas has already achieved roughly.

Expected full year net.

In the first quarter and we expect earnings over the remainder of the you.

Our work.

In addition to sales were also.

So for an increase.

Specifically our electric.

Our utility cylinders, most from three or not.

Customers pain, and we are temporarily waiting late agencies.

Our state regulators for a constructive.

The first incremental.

Ladies and.

Recovered recovery future rate proceeding.

In addition, our gas utilities are largely awful and they have many have passed that next is already in place which helped insulate.

Sales and non payment.

[music].

We also expect increased federal funding on rent likewise.

Certain provisions in the CE program to assist eligible customers both Inc.

Assuming regulatory mechanisms in customer assistance programs, we believe bad debt expense impact will be largely mitigated.

Turning now clearly because of the actions we took in the first quarter service net liquidity as Marc Urbach 800 million relative urine.

Team and currently stands at over 7 billion.

In the second quarter ardent taking steps to further strengthen our liquidity position.

Moving completion of a $1 billion.

In April.

At this juncture, we believe we have ample liquidity for our capital investment plan protect our dividend and whether potential hogan related volatility that markets.

As well.

I'll turn on a.

We are solid results through the first quarter, our card leases that overhead reductions in largely offset and related sales.

Well lesser loads so.

We see no reason to eat smart current financial objectives.

Consistent with historical practice, we will address earnings year.

Rentals is working.

After the third quarter.

The second quarter, we assume that pressure on retail sales will persist.

Really predict with precision what the overall.

Recognizing all these factors were providing that Jeff yes.

Yes.

Yes.

Before I turn it back.

Update on some rail through.

In March.

Oh, it's our submissions unanimously approved rate.

If we miss out on yes.

Resulting in a rate decrease for customers and an increase in the loud equity ratio from Mississippi power, 55%.

Although we filed.

With the first yes.

Gary requesting verification approval is $174 million spend.

Slide from December.

19, we expected decision yet.

Before I turn it back.

Thank our 700, Ben pronounced in a job during this period, everyone is taking the new normal in Streisand's remain open our customer at all levels.

Sure. So sure shows your performance in total.

Thanks.

Well with that I'll turn it back to Tom Thanks drew.

As our nation seeks a path to recovery from the Corona virus pandemic.

At Southern company, we are resolute and our commitment to provide clean safe reliable and affordable energy for our customers to ensure that we are actively supporting recovery efforts Southern company in our subsidiaries are engaged with policymakers at both the state and federal level as they may critical decisions about reopened.

Our economies.

Notably, Alabama power CEO, Mark Crosswhite and I were named as part of the President's Economic Revival initiative, along with the work that I do to help lead the electricity Subsector Coordinating council the principal liaison between the federal government the electric power industry, which has been heavily involved.

Then pandemic recovery efforts Southern company continues its leadership at a national level.

Before we take your questions I also want to highlight the extraordinary response of our teams. After the recent severe storms in April we experienced two successive weekends of devastating tornadoes across our southeast service territories.

Damaged or destroyed hundreds of homes and businesses our employees on the front lines worked tirelessly to restore service took the thousands of electric and natural gas customers that were affected by these storms in the aggregate we restored service to over 600000 customers within 24.

Our hours and proved our capacity to work under duress effectively with Corona virus protocols.

Hi, I'm grateful for an extremely proud of the men and women of Southern company, who continue to work hard each day to deliver value to customers and shareholders. During these extraordinary times.

In closing the cobot 19 pandemic will undoubtedly have a lasting impact on the U.S. and global economies and on the communities. We serve under what we currently view is a reasonable economic recovery scenario, we're positioning ourselves to mitigate potential financial impacts on our company through aggressive.

And thoughtful cost control.

The next several months will be particularly instructive for southern in our utilities as we monitor the pace of recovery move into the warm summer season, and work to increase productivity at Vogel units three and four we expect our business will remain reliable and resilient over the long term in keeping with our long history of delay.

Moving on our commitments to customers employees and shareholders.

Thank you for joining us this afternoon.

Operator, we're now ready to take questions.

Thank you.

If you like to just your question. Please press the one follow up with a four on your telephone.

Hillary three Tom prompt to acknowledge your request.

If your question has been asked by another and you would like to withdraw your registration. Please press the one follow up industry.

If using a speaker phone. Please just John said before entering your request.

Our first question comes from a line of sharp, whereas with Guggenheim Partners. Please proceed.

Hello.

Good how you doing.

Great.

So just a couple of questions here first just started thinking about some of the moving pieces.

We're looking at coal that sales impact for a 2% to 5% reduction versus prior guidance of flat to up 1%.

Better than expected Q1, slightly weaker Q2 guidance versus I guess expectations following them levers.

Assuming kind of normal weather, where do we where do you see coming in within your earnings guidance range for the year and then just remind us the sales growth figures from March and April on Slide 11 are they weather normalized, especially with the recent storms in your jurisdictions, how do we extrapolate how much of that was weather versus covert versus anything else.

Hi, guys. So with respect to the first question.

You know when we set a guidance range I think you know.

We broadly think they kind of the midpoint of the range is a place that.

Without all these other impacts we do that we would expect to land I think we remain consistent.

With our full financial objectives for the year.

I will add I know we received some.

Conversation about should we reaffirm let me just hit that real quick.

It has never been our practice to reaffirm guidance in the interim periods.

We gave you guidance and at the end of the year. So that would be late January February and then once we get through our peak kind of earning season, which would be the third quarter. That's when we give an update as to our guidance.

We believe we're committed to hitting our financial objectives of course, there is uncertainty in front of US and we you know we run the same uncertainty everybody else does.

But with what we know right now with reasonable impacts we remain committed to everything that we've said so far so we're sticking with that I think further evidence of that at the recent increase in dividends.

Sure what else did you want there.

Sorry, just to the.

The weather on slide 11, the impacts that you have from March through April.

How much is that weather normalized and how much of it has impacted from coal that versus the recent storms.

That is weather normalized.

Virtually all short.

Hey, guys just one other piece of your question unrelated to our guidance wrong.

Yes.

Second quarter, yes.

Certainly is relatively low quarter Ross in terms of total.

You can imagine that.

Big difference between June patient April.

We also feel like this is maturing.

Great.

Paul.

Retail customer pays for residential commercial and industrial and even though we are pleased measures in place to reduce expenses those will largely be.

Levelized over our security and you're looking to.

Hello.

What is appearing constrain ordered from sales.

Okay do not like all of last year, I think we reported eight cents for the quarter eight cents. So that was weather related talking we're putting out consistent with what we mourn.

Orders.

Yeah, Andrew Thanks for that I actually went back over the last eight years and just look at what did we estimate and believe it or not this is within the range of estimates that kind of low was 65 in fact I want to say in 2018, we estimated 65 cents. When you consider you have the effect of the co virus current of Iris impact.

No, but this seems it seems like a reasonably conservative estimate for from my standpoint, I'm, Okay with it.

Got it and just some vogel given the impact of covered on the move to push the aggressive unit foresight plan back to May from March I know, we've in the past we've talked about being hopeful that we could see the units come online somewhere between the budgeted and the more aggressive timelines is that kind of not reality at this point and I know.

You will continue to keep that may aggressive schedule until they are zero probability you can be met what probabilities of the site managers, placing now on meeting the aggressive schedule and at what point could you move away from may to something closer to the midpoint between the aggressive and budget at schedules. Thanks.

Hey, Sharp, let me take it one of the predicates in your question and that was until they are zero probability that's really not the case.

We always trying to do a reasonable shot.

And and we stick with that look we we have you. Some margin here, we had an extra month of kind of hit and margin between our functional test and fuel load.

Actually we have seen so far losing kind of 10 days to 14 days in the aggressive schedule. We think through May will lose another two weeks.

People are going to work like Crazy.

To mitigate the loss of that much but we had a month of if you will margin.

In between now and fuel load that were just consuming it riskier than it was before yeah, but it's still a reasonable objective otherwise we would stick with it.

Okay, one last point.

When we go from in the schedule from fuel load to in service recall, we have maintained and I know this has been a conversation and many earnings call. We have maintained a six month schedule there.

China did it in four to half months, and we think weekend.

Meet or beat China.

So we actually have a little more margin.

Even to November.

And to May sell a November is what matters, we got a beat November and our eyes around that this site continues to believe they can hit a may schedule has it gotten more aggressive yeah still is a reasonable shot at it.

Got it congrats guys on the results and stay safe and well see you soon.

Sure. Thanks same to you but.

All right.

Thank you.

Our next question.

Comes from the line of Steve Fleishman with Wolfe Research. Please proceed.

Hey, Dave.

Hey, Tom Good afternoon.

Good afternoon, so couple.

Couple of questions.

So that.

Has the the workforce reduction been implemented now when did it.

End up being around 20%.

But yes took that.

Yes plan.

Okay, Yes, and is it a chip okay.

And is it maybe just give some color on.

You know, obviously theres different people doing different things there are there areas, where you need to refill people.

Skills or just.

How did that.

Yeah in general what we were able to do is to bring people off of for on the three that's how we filled whatever gaps we thought we may see recall and this was in the 8-K I think the first reduction was voluntary and then we move to what we call.

Right sizing.

So the voluntary effort didn't produce an optimal kind of result for all the work faces that we have at the plant and remember as I said in the script and everything else, we're particularly concerned with getting the right mix and the right productivity in electrical and with subcontract and so what we did by moving resources.

Okay from four we bolstered the mix on units three so that we believe that theres a reasonable shot to maintain the aggressive.

Schedule, which hasnt may in service date, so that really is what has happened now.

The other thing I just want to put out is that we are in transition in the script I mentioned.

He about this sawtooth effect.

And we've seen that every time now and those of you that follow these calls will remember that every time, we opened up a new workforce a a new work face in the plant every time, we lead to an increase in personnel well and now even with the decrease in personnel as we remix crews and schedules and everything.

We believe the that Sawtooth effect will occur and so thats why were being reasonably conservative with may in other words.

We did 1.25% in April which still beat the 1%.

That we need for November may may be similarly challenge, we hope, it's a little better but don't be surprised if it's not that great. But then we expect in June and beyond to really pick up the sought to the fact and achieve what we want to do as we have done in the past someone we've talked to you about the thought to the fact in the past in fab.

Back to it has occurred so let us readjust.

Get to get the the teams right get the work practices back together and and then we think we'll get that performance we want to say.

Okay, and then when when we.

Well, we could kind of get an update of how the commission is kind of feeling about.

[music].

Hello, Vogels going is that would that be in this DCM are really the next one.

I think into any special hearing on it.

Yeah, well, let me answer that a couple away Steve I know you're really good about this and others on the call our terms of contacting the commission directly or looking at all the filings and everything else.

So you have heard directly kind of from the commissioners themselves I would never put words in their mouth, but.

But the other thing that I would just highlight to people is that Tuesday. This so.

Just a few days.

The company will be testifying.

And you'll be able to see the interplay between the company in the staff and everybody else and so we'll get some illumination there.

Okay and then my last question is just on just making sure I understand the assumptions for.

Sales.

When you talk about kind of startup later in the summer and then and then.

Recovery.

His recovery kind of.

Off of this very low level now or when you're talking about recovery, where do you mean bye bye.

Why that.

Yes.

Actually hear me around Robinson technical difficulties as Thomas so.

[laughter] area well good.

Yes, we're modeling in Boston based whether it's what you have w. were all in general the mid long our served to 5400 is probably something like.

No.

Blade.

Reimbursements from stayed home through mid summer maybe use in August and then some recovery through the balance of year, but certainly not only if we look into the customer classes and refracking. They are industrial segment, which is not the largest contributor to earnings part ways actually performing quite well.

This is Barry so things like Poland paper on the larger segments chemical are doing quite well because of loan book also because of demand all products some of the thing.

Precursors to automotive lights, youre going to take a little bit longer to rebound, but those industries. As we're watching are starting to reopen in automotive production is beginning to restart across Georgia, and Alabama particular.

On the commercial side, we've seen a free exaggerated decrease so our bigger customers. There are certainly at retail and education.

Some of those things are starting to move back and so.

The two to five total that we gave you really represent those different actions in aggregate. We're looking at a pretty detailed way and I'll just add to that to just so everybody I think knows the Georgia as one of the state's stepping out on Reemerging course, we're doing it in a in a thoughtful phased process.

The other the other issue that I would put out there is fuel prices are really low.

For the quarter natural gas was a buck 88 per million be to you and I think the.

The amount of natural gas cost borne by customers.

It was around a quarter of a $1 billion $247 million.

Lower than last year, so cost of electricity and therefore consumption of energy as more cost efficient than it has been before there's a lot in the mix right now and also I'll just say that.

Then in contact with my friend, Jay Pal from the from the fed.

I would complement and I know, there's all kinds of disagreement about this but I would complement broadly the federal response, whether it's the administration whether its congress.

Whether it's the fed in terms of the timeliness of their response and supporting the economy, especially as compared to say 2008 2009.

These guys are on top of it and I'm sure we get all criticized one step here or there.

But I think all the necessary chemicals or in the C to produce something that will minimize hopefully the impact going forward.

Okay. Thank you.

Thank you.

Thank you.

Our next question.

Comes from the line of even Byrd with Morgan Stanley. Please proceed.

Hey, Steven.

And then.

Good afternoon.

Great.

I just wanted to follow up on the status of Coca that the vocal worksite.

And you know you've taken steps to reduce risk.

Is there we're trying to sort of tracks a number of cases.

Is there a risk of a trajectory of more cases, such you have to sort of adjust work practices at the site further or you feel that.

Sort of the changes you've made of have made the impacts to the number of cases that you were looking for.

No in fact look we started very early on before there were any Ur cobot 19 effects.

We were planning that there would be and one of the very first things. We did I remember it was a weekend call of the executive team.

Was to move to the site.

Essentially a medical village staffed by nurses and doctors we have a.

A disease specialist that's been advising the site daily.

We have all the pp, we need we have turned around and testing conservative work practices and in fact, our realization I kind of we've debated about talking about this on the call, but I'll throw a little bit of it out there are incidence rate compared to the utility industry is about half maybe 40%.

Something like that are severity of cases is way below one of the very smart steps that the site did very early on.

To remove from the side or at least on a voluntary basis with pay.

People that would be most likely to be severely impacted that is elderly or older like I'm, probably in that category I don't want to scrap myself as elderly.

And if they had a pre existing condition.

So if you look at it you know.

One other thing we do that very conservative that other people aren't doing that is if somebody at the site just feels funny, they don't feel well and want to get tested we get them tested not only that we take their work associates out.

That had to the close contact and we test them.

When you look at the amount of testing per person.

At the site relative to anywhere in the communities. We serve it is somewhere we are testing between five and 10 times more people.

And what's being tested elsewhere in the region.

So.

It's amazing stuff sometime in these close contact.

Cases, we will test somebody that is asymptomatic oh ensure they turned up positive we remove them.

And the other kind of telling factor is severity I think we've only had one or two.

People be hospitalized our go to a hospital.

Otherwise, they're being tested with the folks on site and.

And about half of the people that had been tested positive have returned to work.

I think that all pretty positive stuff.

A couple more things that we're doing.

At any work front, we limit the amount of people are doing the social distancing to three per worksite.

So sometimes we exceed that with everybody's approval, but that generally is the practice, we have eliminated close quarters break areas close quarters lunch areas, the big bussing and all that stuff. We really have worked hard right of way early on to make sure and ups.

Principal was.

That we wanted plant vogtle, three and four to be a better environment for the workers there than what they could find elsewhere in their homes or in the communities in the surrounding area.

And I think we've done that.

That's really helpful color. Thank you very much and just checking in on the status of just equipment testing on the site, which might just given a high level update on.

Yes, maybe percentage of equipment tested or whatever else is most relevant as we think about just.

Sort of overall status of testing all the equipment on site.

Well all the major equipment is tested right.

So in fact, it was I mean right as we entered the call. We got the sign off from Westinghouse. The opened vessel testing that testing was complete just as you yell at your children and teenagers check your work before you turn it and that's what we have been doing in the past just recent.

Day hours, whatever and in fact, we just got clearance from Westinghouse and in fact, we had they had verified that we had passed all the test on OVC. So we were very happy to announce that today.

I don't know how it what else would you want to here.

Well I think that makes sense I think in the past there was some sort of metric a percentage of equipment that's been inspected.

But I can follow up afterwards.

I to all the major equipment is there and had been tested well tested again, we'll take goes into a system, but were done one other thing the.

The RCP right or is all onsite and everybody admires that as they walk by it it's a spare we got that from summer.

Great. That's all had thank you.

Thank you.

Thank you.

Our next question.

Comes from the line through Gushed Chopra with Evercore ISI. Please proceed.

Thanks for joining us.

Thanks, Thanks, Tom.

Thanks for taking my question.

Just wanted to get back to eight or nine you you mentioned youre able to offset.

A lot of the impact there would cost cuttings, but also I believe there was Georgia and correct me if I'm wrong.

You were able to amortize some of the rotary accounts to kind of mitigate the earnings hit there is that sort of an opportunity available this time around.

Well, you've got a great memory and you're correct that is in fact, what we did we took some steps to lessen the burden, but we don't feel the need to take those steps right now.

Those are certainly options in the future to approach regulators, if we need to the one thing I think that you can just point to around the system is that I think we've received.

In fact, I would just go broadly Rps sees but also it's a FERC and NERC at the national level.

Folks have really I think bend over backwards to accommodate the needs of this unique environment and I think the issue of of being able to set aside as a regulatory asset recovery of.

Disconnect costs and arrive everything has been another evidence of constructive practiced by our state.

And at the American FERC level I'll tell you they've been on these FCC call Likewise, they're doing what they need to do in order to help the industry get through this period not by imposing over regulations et cetera.

Hi, I'm very.

Complimentary.

What are generally very tough regulators, taking constructive approach is to help.

And assisting through this timeframe.

Got it thanks, Tom and then let me just shifting gears and can you talk a little bit about the credit metrics and and you really confident in your and your 2020 bps numbers, but I'm just kind of curious as to what impact. If any are you seeing or you expect to see on your if I photo debt worse.

Is the targets in any color on.

On the dialogue you may have had with the credit rating agencies.

This is true since we've had numerous conversations with the credit rating agencies across a variety of topics in the very fulsome review each of those individual business units not four weeks ago.

Well, we're meeting park.

It.

Doesn't change much our goal is to sort of stay with a buffer relative to what's expected for the ratings categories that we maintain and generally as we get through the construction to open a wrong improving trajectory, which is a function really of.

Just how the economics work Vogel.

The other thing that we've been working through is generally liquidity, which we think is.

Paramount operating well functioning business and we were fortunate to be good credit and good in reasonable markets and we accelerated all the debt issuance that we needed to do for the balance of the year or at least for ourselves in a position to.

Not face those challenges later on so I think very comfortable with how we're managing liquidity in credit and total yeah, Andrew I'm, just going to ask if you're comfortable saying something here, but our relationship with not only our regulators, but also the rating agencies et cetera is continuous not discrete.

And just recently you went through a pretty intensive review by the rating agencies. What can you say about their response to that.

We would expect and probably very similar to 2008 2009 as they have sectors that they were involved are more than a utility I think what theyre focused on to our live constructive and proactive nature of regulators behaviors seeing.

Insulating us from things like bad debt expense.

I think it's a very protective and productive thing, but in general the rating agencies are still concerned with the same thing they were concerned with before but I think certainly our sector is legitimate concern than than most others and I think we got a favorable review from that yes.

Okay perfect guys really appreciate you taking the time to answer your questions. Thank you very much yes, Sir thank you.

Thank you.

Our next question comes from the line Sophie Karp with Keybanc. Please proceed.

Hello, Sophie Huh.

Congrats on a solid quarter. Thank you for the names here.

Absolutely.

Yeah, I love the questions have been asked and answered Brad maybe if I can just follow up on the couple of points here.

First on Volvo Alright, you mentioned that you use the size of seems to think people I think you said than the overall workforce by 20%.

Is that based on kind of CDC guidelines or your internal guidelines that you've developed and make one may you go back to larger teams or do you.

You know obviously it will get fair to say I believe that business, causing some productivity declines right. So.

Is that sort of in your normal sort of duration of the projects in your mind or I was going to go back to make more normal staffing at some point.

Yes, so that's a great question.

So if you recall the I think we've done this in the past kind of Capex by quarter Weve shown these curves.

We're kind of we're kind of at the peak of our curve and assuming that we continued to be productive the curve actually starts to turn down on unit three.

It'll ramp up a little bit more on unit for going forward.

So my sense is we're going to evaluate our progress in the months ahead, but it could be that this level of activity is appropriate for.

For where we want to be on unit three and four we were we were on the downturn.

Activity at unit three just right there so dropping to drop in the whole site from nine to seven.

Given exactly unexpected it's a little accelerated.

Which means that we're probably going to push out some hours.

But it's not.

Unexpected and and you know we didn't intend it when we refinanced the schedule that refinement, we did in February but accelerating for those two month gave us essentially a bank of more margin.

That we're able to use of moving people from four to three to accommodate the difference in the re sizing.

After this voluntary reduction.

It was actually not a bad place to be.

Let's see what happens in the months ahead.

Got it Scott.

Oh My other question was on bad debt expense right and the with credit early I guess and this as far as Berlin cycles go that's on.

Is there a point where it might be an issue for the balance sheet that where you might want to approach your regulators to maybe copper grades for the next rate case cycle, which is now some final way.

I guess, how do you think about it internally what is that threshold if any.

So assuming this is through I'd say, a number of things in general our gas utilities have riders were trackers for these types of things and so our exposures were probably more isolated the electric utilities, we've had very constructive regulatory conversations and in fact.

Not so much in mechanism, but at least.

And understanding that bad debt expense would track through regulatory asset we can recover when we when we get together next to discuss rate. Your question I think was around the interim period and you know.

As bad debt expenses, not one of the things that I fear.

It's a relatively low percentage of our total revenue the thing that we're tracking really is.

Late payment of bills and so we've been monitoring the number of customers in arrears. It has not changed materially over the last month, we typically have about 15% of our customers in arrears, then given time, maybe more than a normal.

And we know that if we were to happen provisions or something like a 40%.

Percentage of our customers being in arrears will probably happen permission somewhere between $801 billion additional capital per quarter. All that is incredibly manage all within the existing liquidity, we have within the business and so we don't anticipate that they'll be anything more than maybe some temporary impact.

So liquidity, but really no long term impact so about that yeah. Let me, let me add another comment it's under the who knows but I think it's still something we've talked about getting ready for the call and that is when you think about the intensive impact of cobot 19, it's occurring during light revenue month for us it's occurring during April.

In May which are not strong month. This is atlanta, particularly but the southeast is known for these beautiful long springs, and our big revenue months, 60% of our revenue I think comes out of the summer so that's going to be.

So so.

When you think about the intense impacts is coming during low revenue and therefore, if we have some recovery that's the who knows part that'll get us back to I think a good spot. They certainly one more thing you mentioned somebody pointed out to me that I I Didnt cover you said do we follow CDC guidelines in fact, yes, we do and in fact, I think we're even more.

More conservative NCTC terms of recovery and all that stuff, we keep people up 14 days, even if they've been around somebody that's been tested.

Brought about effects.

Okay, I wonder if anything.

Just one last thing we do survey, we do stay in touch with the other mega projects around the U.S. and.

Their experience is not that different than ours, I think 95% are still progressing kind of as we are.

Great. Thank you.

Thank you.

Thank you.

Our next question.

Comes from the line of Michael Weinstein with Credit Suisse. Please proceed.

Hey, Tom and John.

How are you doing.

All right.

Hey, Jim on French initial sale.

Your forecast about 1% to 3% awesome.

Little bit light.

Yes for up compared to what I've been hearing from other utilities, when the registry to 4% for residential sales.

Is there something about presidential sale that you expect to be a little more.

I guess not as if you ask about it being offsetting factor.

Michael I think probably what you're doing major difference in time period were too.

3%, we've got on our first on slide 11 really is meant to represent full year impacts might be we certainly are seeing.

All these classes commercial enough room residential more exaggerated response than what's been taken here.

We're just shows this is what we think the full year.

Given the point in time with the point in the heating cooling cycle, where we are today and as Tom said April as sort of interesting month in Georgia people are starting to change over from heating and air conditioning. So demand is quite like what we expect in May is.

A fraction of what we expect in June.

In August and September here are crazy.

Right.

Yeah.

Our global.

RCC fuel assemblies being manufactured.

Are they banks now.

Is there any news on this site.

Yes.

Where are they manufacture did you say, you're breaking up would you say, whereas the fuel manufactured.

We're in South Carolina, Telus, we've seen that.

Yeah, I'm, sorry, you're breaking up.

I'm, sorry, you really breaking up but what we hear is where is the fuel manufactured in at South Carolina.

Are there any issues on site or manufacturing.

Is there any fuel onsite no.

That will.

So that's where we're no no Jack.

Okay. Thank you.

Yeah, Michael Thank you I, if we Miss your question there. Please call us after we'll be glad to hit it for you you were just breaking up a lot.

Thank you. Thank you, yes, Sir thank you.

Thanks.

Our next question.

Comes from line of Jeremy Tonet with JP Morgan. Please proceed.

Hello, Jeremy how are you.

Good afternoon, Thanks for having me.

You bet.

Wanted to come back to Bogo here, a little bit if I could.

The lower mobile workforce I was just wondering what type of working hours per week or you guys achieving now.

And kind of what levels would have been concerned with regards to the schedule or ask definitely what type of working our numbers you guys need to see you can hit that monthly completion rate of about 1%.

I think around 510.

And then.

We don't do as many weekends as we have so we've backed off a little bit that gives us a little bit of Optionality should we need to work weekend. So we backed off a little bit during this timeframe and less density and everything else further we have shifted more work into the daylight hours as it.

Both of the night shift.

And we have shifted more hours on a unit three.

So.

That kind of the.

Broad approach there.

That's a that's helpful. There thanks.

Just want to shift gears, I guess to London appreciate that it might be just well too early to tell but it seems like Georgia has recently started to reopened a bit here with that process started just wondering if you could share anything you're seeing with us lifetime.

And with that able to warm kind of your load projections you provided early on the call.

Well look we're in contact with our key account customers I think we always do a pretty good job there.

And let's let the estimates stay where the estimates are that you know you asked a little bit of a different question kind of what's our pulse of the.

Of the community.

I think there is a positive five right now.

People are trying to figure out ways to to start again, the restaurants are doing all this takeout.

It just it feels a little better drew lived in a different part of he lives right in the heart of the city I live in the Burbs or what's kind of your experience well another way to think of offices, we have real time data on actual usage and then as you describe Tom we have four polling all of our commercial industrial.

And I wouldn't say that but back into governor has opened the state has not changed human behavior materially, but I wouldn't say the in general as we all commercial versus a particular confidence around coming back as low as.

Has improved in the last couple of weeks last set of data that I saw.

George in particular, but these are just for early shoots kinds of signs and we'll hospitals actual demand. We certainly have some categories, where we don't expect any immediate improvement education is one of our.

First of all segments, and we don't anticipate people being back in school this season.

Like hospital related exceeded.

Historical consumption.

So do you expect in so I just give us a few more orders do more months, we'll be able to give you a little better a bit drew you reminded me too I think you guys would find this interesting drew is on the board probably half the hospital beds in it and the state here in Georgia anyway, and his wife is a doctor.

Give a sense as to how many of the beds are being used because this is kind of this capacity flatten the curve concept.

Tom It's.

I, probably have to stay away from absolute number.

Some of these institutions for both of them. So I would just say that.

And he's been with the functioning of Emory and raising sort of safety and hospital or academic institutions in town I'm incredibly made their ability to ramp to an expected demand and in general I think.

We're seeing cases in those hospitals that are a little lighter than model rejected.

But the ability of those hospitals.

To wrap well couldn't be afford them and to.

Accommodate.

Hi, crush there has been really probable variances.

Students are but we have 100% more capacity than what we're saying in terms of actual cases right now so when you think about coming back to work.

You know, there's a whole lot of gating issues that we've been working on I've been working on it on national level in the industry and here, it's either one of the big indicators. It have we flattened the curve do you have capacity yet. The fact is and I think it's been very instructive it bogo.

We have to learn to work with the virus, we have to learn for American commerce to get along because the only way you can be assured you don't have the virus is that widespread available vaccines and we don't have that yet.

Until we get there you won't have complete recover so how do you Act how are you able to persist in this environment and I think thats why I mean, who knows but I think thats why governor cat that was one of the issues. He was looking at do we have available capacity yes.

The next question, we will all have as a nation is do we have a second wave later this fall we'll see.

That's a that's really helpful. Thank you for taking my question.

Yeah, you bet. Thank you.

Thank you.

Our next question.

Comes from the lineup Paul Fremont with Mizuho Securities. Please proceed.

Oh, Paul glad to have you with it.

Hey, great to be our.

Hope, you're all safe and healthy.

Yeah, Yeah were great.

You had initially planned.

Turnover and testing to occur a simultaneous with construction.

Is that still the plan and does cobot 19 complicate this two to the small footprint of the plant.

Tenant turnover and testing a construction have been going hand in glove along the way.

We get thorough reports I know, we do thorough report once a month with everybody at the P.S.C., you know and the co owners and everything else that's going according to pace and sometimes you speed up testing remember we got into a discussion about that past calls, sometimes you slow it down letting construction catch up or.

Are you test another area that plant while you.

I'll focus on construction in a particular area all that's going as expected I I would say that's anything other than a.

Then exactly what we've expected and I think.

This approach has really served us well, we've we've talked about that in the past, but fail fast and learn in other areas has been really helpful to us.

And then secondly can you.

Update us on.

How many final approvals you've had from the NRC on high tax.

And.

Are you gonna have to wait until construction is fully complete for a lot of the remaining high tax to be signed off on or or how should we think about the timeframe for that.

Yeah, Let me just give you a quick numbers they I tax that had been submitted.

All that you I am. So this is the the I tax had been submitted and form without the number.

I have been accepted by the NRC. So every one of the so that really.

Lessen the bow wave that we have.

We had originally I think 449.

Hi Tech Foley that need to be submitted for units three and we've had a whole lot of those complete I guess, we still have about to 70 left.

Before they are certified and we get the clearance to load fuel.

Thats been going well.

At the end or they I think.

And then when they let me just Capa. Yeah go ahead go ahead Paul.

I was going to just asked for the 270 to be approved you essentially have to wait until construction is complete or are you expecting that to happen.

Earlier.

There.

And so it's a pace along the way there is some elements of the to 70 that are after construction.

But we think it's a high tax are going well were either ahead of schedule or whatever Paul you may remember I used to say that I tax would reach by top three of concerns and while we're concerned about everything.

I think electrical work and subcontract work are are much bigger concerns at this point than our ability to deliver on AIPAC I really think those guys have done great and I want to throw up okay to the NRC. They have staffed up appropriately and the teams that have been.

Charged with approving the you I and Danny I tanks that are fully complete I've done a very timely job of doing that I personally I've worked with us Steve Kaczynski and team visiting with the NRC commissioners and they are committed to holding up their end of the bargain.

I feel I feel good it's still a big issue, let me not minimize it but it's something I feel pretty good about.

Tom.

Add.

Most of the testing in turnover first possibly yeah.

We're making progress on test me turnover on the actual starts with the milestones themselves and so.

You will see a pull those milestones in our progress against so some are not the best indicator you're going to happen successful.

Yeah and it it it's just been following you know I forget I did we do the a variety of these town halls I did one was schar recently in some time ago with fleishman and sure enough back then I said ended the month, well, we finished OVC and alone.

So we're able to follow through on the scheduled despite the challenges of Cove it.

And then after implementing the 20% workforce reduction.

Are you anticipating a significant improvement in productivity at the plant.

Yeah.

Oh yeah.

And you just got to remember the Sawtooth discussion, we've had before anytime we staff up or now staff down and we have to right size and bring new people on it you know getting used to a new work fraud, and new people working together and new supervision. There always is a bit of a learning curve. That's a soft too yeah, we are expecting an improvement.

Let me point out again.

We have been ahead I think this chart on slide seven really shows it but even with April it's just a slight downtick from our aggressive schedule and I think pretty far away from November.

Even during April.

We completed 1.25%.

Target was too.

The November schedule calls for one so we even made some margin to November even during a bad month.

And then my last question looking sort of its at your slide 11.

With respect to a potential cost reduction.

Where were in relation to the 250 to 400 million of of potential revenue erosion, where would you see the ability to sort of.

Offset that with without went out towards the lower end the met all the high end, how should we think about that.

Well, we're going to have to see how this quarter goes but we're going to put plans in place at least give us bookings to achieve at either end of this.

So with this product.

There are certainly costs that we will have Ross our things were you reduce the absolute on the wrong expense travel and entertainment or problems. In particular is perfect example.

Workforce.

Nearly 3000 people very few people were traveling for a number one we don't expect creating backlog trial that will then come back into our.

Cost three there will be.

On the spectrum, where we will be delay expenses into future periods and so we're just going through an effort to identify and both of those categories and across this entire spectrum of potential revenue declines how we might function in either with either of these top or not you has a principal were not refilling open jobs.

Without a CEO approval, which really freezes has the effect of a freeze.

Yeah. I mean are there are there sort of examples of like past years, where you've gone through cost reduction and any numbers that you can share based on past experience.

Yeah, Yeah, so eight Oh, no not number was probably a little bit below this range, but.

I think a pretty good indication of what the capabilities our understanding to know nine the company was a bit smaller so the acquisition of NGL resources came in.

Heads and so our cost complex is quite a bit arm.

Our own.

Total loan that was probably in the five plus billion dollars range, maybe across most a little bit of smaller than that.

Plenty of room to.

As possible around us from Jeff.

Great. Thank you.

Yes, Sir thank you.

Thank you.

Our next question.

Comes from the line of Michael the Peace with Goldman Sachs. Please proceed.

Hey, Michael how are you.

Well, Tom how are you glad to hear it everybody in the southern company family is doing as well as possible.

Thank you for taking the question actually when I ask you about the jurisdiction that people don't ask you about that may be one of the best ones.

I don't think about an up can you talk about Alabama.

Can you talk about both where things stand with the approval of both the SAP acquaintance in the solar.

The people.

Ownership that you all files that yes, the and also I thought there would say oh.

<unk> rate docket air this year as well are going in the winter it into the spring can you just give us an update on that and then finally.

Different as Alabama demand trends relative to 200 watts.

Yeah, I would say in general you're in a giant process, that's on track and Georgia for all that stuff.

Sorry, and Alabama.

Yeah, I think everything is going as we thought it would there.

Yes. Your question, Rob customer mix, just like you hardly bar jurisdiction tends to move toward more industrial as you move west generally.

That's true, but what's interesting in Mississippi, 25% of Mississippi sales, our wholesale and those wholesale sales are largely residential.

So you get you give it a bit of a different mix in Mississippi, but small, but drew is exactly right, Alabama, Georgia pretty similar.

Okay can you remind us in Alabama, what the rate request was and also whats the timeline could get approval for the gas plant both acquisition and development.

I think we were looking towards June one way or the summer early summer for for that process to occur.

Thank you and I think the only other piece of news there, it's not Alabama, PSC news, but the FERC did approve the gas plant acquisition.

That we project to early summer so we got that out way.

Got it thank you Tom much appreciated.

Thank you my friend.

Thank you.

Our next question.

Comes from a line of.

Yeah do when they Smith with Bank of America. Please proceed.

Hello, Julian how are your house [noise].

Hey, how do you guys. Thank you very much well.

So just one follow up on on the all of them upfront.

Yeah revenue right.

I wanted if he's very clear about those.

The constant effort just to quantify this little bit more easily you seem to offset anything in that range well or how do you think about.

It is the magnitude of cost savings at the contemplating to that you're doing.

Looking at this is you could see to 400 as that's equivalent telling them a month after looking at your your planning here.

Yeah no.

Think about this.

Plans in place or work through plans that could help us either into this range. What we actually have to execute against is going to be determined by how quickly the economy's respond in our servicer.

And the other thing I would just say I mean, that's the range. This guy here again, I I hate to say with all this uncertainty gets kind of a who knows but.

I think earlier, maybe a month ago I was saying 250 to 350, we tacked on 50 million.

Just out of conservatism in a more prolonged kind of effect.

Oh, yeah impression Julien this is a little bit Liverpool, there are certainly illumination and we're just going to have to see how.

The demand response evolves over time, but there again to that that would reflect even its highest then we're still within the range you know yes.

I'm going to move the easiest way to turn this into earnings per share. We generally are up $10 million for a penny. So you can divide this might have to get some sense a range of impact in total on a gross revenue basis and that adjusted yeah.

Yes.

You need to tax effect that he was new drew just gave you an after tax net income effect.

So this is pre tax.

Yes understood.

All right.

To start the call.

I was talking about this does the salt kind of normal 20% production next year and.

Workforce housing this amount making that up.

On the project you also talk about delaying.

For look this year.

You're going to ramp back up labor later in the schedule here at this point or how do you make up for that 20% workforce reduction.

Cumulatively.

Yeah, I wish I could you talk I wish I could yeah, thanks, Julien and there's a good draw with my finger here in the air but.

You know we were doing a one on one eye drop my little piece of paper I had written things I'm so famous for there.

Just imagine this if I had a curve that showed 9000 people on site as we wind down units reconstruction heading into hot functional test the wind down of people on site for unit three occurs so the curve actually goes down.

What we're doing is and what we said about you know kind of.

Hi, functional test being kind of now August September all we did with push it out a little imagine you put your hands down on the peak of 9000, and it pushes out a little bit to the right.

So.

All we've done is tried to maintain that level I don't think you're going to see another big peak here, we were already at the peak.

And I think now that takes starts to wind down that's why we feel comfortable with the movement from nine to 7000 onsite drawing some off a four which pushes for back to its original schedule.

And still maintaining our ability to hit the aggressive site plan for unit three.

All we did was shift the curve, a little bit and and we and we funded that curve with unit for.

Got it Okay quick follow up here and I'll rounded out here under what scenarios.

Stopping construction around cope it.

So it sounds like slice of a lot of mitigating factors implemented a lot of compartmentalization of labor already going on in terms of mitigating factors, but how do you think about what that scenario might look like and when when you might trigger that just.

Address the range of scenarios here.

Yeah, you know what I suppose there is a hypothetical in their Julian I I, just don't think Thats likely I think.

America, Let me just speak broadly and I'll take it down to the site America has to learn to live with the virus our experience so far knock on wood.

Has been much less than what you've seen in the industry about half and our experience on site. Likewise has been less severe I think largely because of the smart action. The people on the site have taken for example, removing the at risk personnel and paying them.

Oh, well before we saw the effects of the site on the site.

People are now coming back to work.

One other point is it looks like the average over the past I.

I don't know four weeks, if you do a four week look in average.

It looks as if we may be passed the peak.

Peak on the site now that will only be borne out you know in the next few weeks to calm, but if you do a seven day rolling average it looks as if incidence levels are decreasing.

So look there's a hypothetical in there.

I really think as a practical matter the job at hand is continue the good work, we're doing onsite make that an attractive place for people to work, which I think we're doing and I think the labor unions at all are calling us out for that kind of unprecedented response.

And keep going.

But I just don't think I don't see it right now.

But we'll see excellent art.

Yeah.

You can tell me you're confident excellent well thank you.

Thank you Julien appreciate it but.

Yes.

Thank you.

Our next question comes from align US Andrew we so with Scotia Howard Weil. Please proceed.

Hello, Andrew Thanks for joining us.

Hey, everyone in the interest to time I'll leave it to one question here on page 11, I'm, a little surprised maybe I missed this I apologize if I did but you're forecasting a bigger decline for commercial volumes in industrial most other utilities, you're talking about it the other way and I know you mentioned your mix is roughly a third a third a third so can you explain.

While you're expecting a deeper to commercial than industrial.

Yeah look I and the good news there is if thats what your big hit is I think your ability to come back is much better it'll come back quicker that your ability to shut down a plant and then get it back is harder than restarting a restaurant in fact I was on CNBC. This morning, and I know right. After may was the CEO of IMU.

He says our ability to turn theaters back on is almost instantaneous so look.

That is an assessment of our key accounts in our marketing teams across the system. That's just what we see our industrial.

Make up the kind of folks that we see.

Really had been having a great quarter in fact, if you look at the a month by month sales at industrial.

Gosh are up momentum statistics, I'm fond of Rica of.

Mentioning we're showing really are quite positive momentum through February and it's just with co bid. What we saw were some companies taking outages. They said well you know if we're going to want to socially distance why do we go ahead and take an outage and do some maintenance spending a lot of people.

Oh.

We actually think industrial recover faster more resilient.

The other thing that we have in the southeast here is a industrial depended upon natural gas as a feedstock, particularly in the chemicals area I think thats, our number one a industrial customer and with natural gas being where it is those guys are producing product that really attractive levels. You know we saw this again in 2008 to three.

2009, and especially I would say, Alabama has been particularly proactive and putting in place rate plans that preserved industrial load where across the United States. They didnt have those things and industrials tended to shutdown plants in other parts, United States and moved their productization.

City to the southeast.

For all of those reasons or that's why we think industrial is more resilient and commercial good news is commercial is going to recover pretty quickly in my opinion.

Okay. Thank you.

Yes.

Thank you.

Our next question comes on line of Paul Patterson with Glenrock Associates. Please proceed.

Hey, Paul happy with it.

How you doing sounds like you got done well.

Yeah, we're hanging on there.

So we wanted to touch base with you on a sort of just basically your economic forecast I guess.

Sounds like you guys are quite optimistic that once this.

The sort of stay at home and social distancing stuff is resolved people, we just sort of coming back and it'll be business as usual.

Is that the case are you guys basically thinking that I'm just wondering.

What is your economic forecasts.

And your growth rate in are you still sort of expecting 1% sales growth. After this year.

You know the 400 million estimate assumes that there is more of a through the year impact.

Yeah, I don't know that.

Great too much optimism I mean, certainly you shake it feels better where we're sitting today than it maybe on the downward slope and a couple of weeks ago, yeah, but our projection from 5% reduction in total retail sales as.

Relative to what we see in history. So this will not be without economic pain for sure. We do think our hobbies generally in the southeast.

We've got good in migration, that's a good place new business and so long term, we relative to others. We think we've got pretty decent economic climate remains on pace to get back to normal see though is in estimable. Yeah. There is lots of degrees of freedom and all that's it's just our most reasonable guess at this point and I know and I.

My Arcos that the most of you guys on the phone that live in the New York area, You know I'm from New Jersey, we all have relatives and people that have been impacted by this and so we're very mindful of the grave circumstance.

That's not the case down here at least we haven't seen it it's much less severe in the southeast and what you're experiencing up there.

Okay, but just sort of make sure I understand this.

If you guys see hits this year, but then it sounds like you know beginning of next year, we're pretty soon thereafter, you expect.

Arms or your earnings guidance with everything your long term growth rate that essentially that the economy will do the global pandemic will not happy that meaningful impact on economic activity.

In the region.

So so yeah. Okay. So now that the I'm, sorry, I feel like a different question and it's interesting will there be a disruption in the economy as a result of the.

Covance deal you know.

That may be a my sense is the United States is in a pretty good position relative to global economies with respect to this issue we'll see in other words.

Is there going to be less demand from Europe for American products, So what about China, one of the other impacts that we've been talking about at a federal level on this returned to work.

Is kind of revitalizing the supply chain to the United States, making us a little less dependent, particularly and critical infrastructure for reliance on foreign economies.

You know still sitting there in Congress is an infrastructure bill.

My sense is there's more energy excuse the pun.

Hi, and future legislative initiatives that could overcome some continuing sustaining impact.

Of destruction in the economy, some other things could emerge.

My sense is right now if I just sit here and think about 2021 2022.

There may be some continuing impacts but at this point I don't think there at all significant to the point will be would change our forward guidance on a 4% to 6% EPS growth rate.

Okay Fair recall, the dominant issue for us is getting Vogel bill.

Once we clear units three and unit four to service the rate of increase because of the earnings rate inside the construction period recovered to a full return on capital.

It's hard to beat that down.

Okay, just on Vogel I'm, just sort of quickly here.

It looks like you guys or if I'm correct when I've been estimating it looks like for the people that you've been testing and I think it's it's up into the 400 range now or something it looks to me for the reports I'm seeing that remarkably pretty consistent at 28 that 30% or something.

And I'm just wondering is is there any sort of maybe.

Obviously, the lot more people than that working at the site.

Is there any thought about doing anybody testing or you guys can you think about herd immunity or anything like that or is this just basically.

Sort of people, who come in and say, Hey, I don't feel well give me tests kind of thing.

Well look were ER, we got early availability on the best tests, we could get at the time. This the antibody test are really pretty interesting in fact, we're talking about that at a national level.

We have had admirals your roar from HHS, you know who's the.

Director of health and he kind of has the whole testing regime in place.

That's something that's attractive, but it's just not available right now.

You know, we can test all over the place and in fact.

You can test everybody.

And they go home and you'll have to re tests and the next day and the next day and the next day testing is really valuable and I don't underestimate it but it doesn't solve the problem until we get a vaccine in place we're gonna be having to live with this environment in the nation.

Okay.

And then just I'm just really quickly on the on the sales numbers. They include.

They're not just it out for leap year is that correct for the quarter.

I think they're not adjusted.

Okay.

That's it for me I really appreciate it. Thanks. So much. Thank you appreciate you joining us all.

Thank you.

Our next question comes from the lineup Charles Fishman with Morningstar. Please proceed with your question.

Thank you.

Hi, Hey, just just one question you got a 40 billion dollar five year Capex program. The bulk of it is not vulnerable you've given us great detail on Vogel.

You had a statement no expected supply chain.

Problems disruptions.

What.

I get that but what what is causing some concern within the the supply chain.

Is there something that's going to be more expensive and that Capex is there something maybe you've pushed out a year or two that you'll you'll still get done within the five years plan.

Any additional color on that.

No expected supply chain disruptions comment would be appreciated.

Yeah, so where the size of the nation of Australia in round numbers I get that statistic were a little bit smaller but.

When you think about energy production, we're kind of in that Lee.

We have long standing relationships and we are considered a high priority customer with a variety of resources and when I say, we don't see any problems in the long run that doesn't mean people aren't working really hard to make sure that they understand what the perturbations may be in what they're going to do to resource, though we had been saying.

Some challenges, but we've always been able to overcome the challenges.

And I want to say drew we have about at least a six month kind of forward window, where we're absolutely confident of no problems. So that's kind of our safety margin. If you will when do you think about the nature of our Capex budget. However, it is really tied up in making our.

System more resilient from a transmission and distribution standpoint, it is tied up in future generation, whether it is renewables or.

Some of the new generation required and Alabama.

And Georgia and then it is tied up in environmental matters, particularly for us a ash ponds, which I think is 10 billion over 10 years in round numbers. So it is stuff that I think we've got great visibility into the availability.

The equipment required to support that program, it's not subject to.

I guess drew uses the word smalls Oh, we have a lot of visibility and we're a big customer and people generally worked very hard to meet our Nate.

And we have pushed on this a lot we've got a great Guy Jeff Franklin It runs our supply chain for the system.

We don't see a problem right now.

Two layperson or from one of our total Capex plan and as you said environmental remediation at Ash Pond isn't really reliance on technology in general we've got enough material.

Yes, we're crop for a good period of time and expect normal long walk changeable replenished and meet whatever need we might have and and let me throw one more factor out there I throw another bouquets somebody.

The director Sesa and Homeland security as a guy named Chris Chris is doing a terrific job within the confines of his responsibility in calling out and then my word they put out an advisory bulletin of essential functions in America and of course health and human services is right at the top right now.

But right behind that is the electricity function in America. That's also part of the recommendations by a nyack National infrastructure Advisory Council and also the work product.

Of the so Larry of Commission that Uh Huh.

Look.

People will put a high priority on making sure that our needs are met.

One last point.

We have a terrific relationship with our valued partners.

In the in the labor market. So the U.S. building traits had done a hell of a job.

Making sure that the people are there and I think we worked very hard to make sure that they are valued partners and treated as well as anybody treats them in the United States. They are strategic partners for for decades, and we treat them like that and I think the labor will be there when we need it.

Okay. Tom Thank you for the extra long call on an extraordinary times that wasn't yeah. Thank you know we appreciate your attention.

Thank you.

Our last question comes from one of Ashar Khan.

With sufficient please proceed.

Hello.

Glad to have you with it.

Great Tom.

During the progress is a I would say exceptional and really whether whether you guys are doing can I just ask I didn't want lost a question, but I'd part because of Reg FD and because of disclose shows and Miss contact usually you have turned around 80 cents for the last four goes into said.

Second quarter, except for one just 17, where we had like five or six cents dilution, which hurt at quarter end. Even then we aren't 73. So can you just described to me why the pattern of earnings is going to go from the average it P. I do like 65 into second quarter what.

What does it make can get and nicks of normal second quarter was this the prior trajectory of how the earnings have come up.

Yeah, Ashar, let me actually I went deeper and preparing for this for the call, but like I said I have in front of me. The data last eight years, our LOE was 66 cents, but we had three years and the 60 66 69 68.

70, 170, 375, and only the last two years had been 80.

All we're doing is taking a conservative shot at what the second quarter Cove. At 19 thing is it's always a fight I always laugh I used to be CFO and I had always extract an estimate from the system Cfos.

And that well the inside joke inside southern is when the Cfos kind of report what they think they always have a conservative bias in the joke is it the positive variances are always temporary and permanent variances. The negative variances are permanent so we always have to fight through what the right answer is I think.

Drews done a great job.

You know I can't say that 65 is light I'll, just say that it's reasonable there's a lot of degrees of freedom of conservatism around what's going to happen with Covance 19, we'll see.

But thats the data I got the data right in front of me.

Sure. Okay. It's fair to say that this quarter will have most hopefully the largest hogan.

Oh I can impact of any court will experience.

The hoping that the expectation is we're going to reduce our expense structure.

As Tom said that generally through halting, adding additional headcount was part of our plan that is something that will reduce expenses over the course of the year and not be isolated to this quarter. So we have planned for a light revenue in second and less expense mitigation that we can achieve open.

I'll be here, but we're still committed to our financial objectives for the year.

Thanks, and well I wouldn't get excited about the second quarter.

We're still committed for the year.

Okay. Thank you.

And boyish are we had a good first quarter.

I know you that excellent quarter.

Yep.

So good start.

Right or anything else.

That was that will conclude today's question answer session. This or are there any closing remarks.

True you Wanna latest huh.

Again the same thank you all the folks that are working hard.

Customers every day.

Living our values.

With 15 or 17000 people working from home, we're getting the job. So thank you very much to all the work teams that are.

Working hard assets great outcome for us.

And from my perspective, working at a national level, whether its.

So thinking about homeland security with Chris Chris and his team Department of Energy Secretary Danbury yet.

All his team is doing a terrific job the industry is responding exceedingly well and you should know that the industry. In this case is eight union of the investor owned utilities and the cooperatives and municipal we're all working together to solve the problems as they arise and in fact, you know the favor.

Gretzky, saying, Oh skate to where the PUC will be.

Inc. This industry is way beyond reacting to the present.

And really into thinking about the future. We're very mindful that hurricane season storm season is ahead of us and being able to demonstrate as we have four decades effective mutual response.

To the problems that will arise this year.

I think a the industry is doing a terrific job so kudos to all of my brothers and sisters out there.

And then finally for southern what a great start to the court to the here that's given us some tailwind I think to address some of these things.

There is a lot of uncertainty ahead I'm very encouraged with the team at Vogel when you look at the data I think they're managing.

These unexpected conditions in an exceedingly prudent manner and the rest of the system is going great with the their ability to respond to the storms and still serve customers well.

With this Corona virus protocol in place I'm, just very encouraged about our ability to deal with whatever comes our way for the rest of the year. That's why we remain committed.

I want to thank you all I know, especially those of you all in the northeast you know on from New Jersey.

Got relatives up there and I know you guys are dealing some very tough times.

I know, maybe your families or maybe friends of families are all being impacted our thoughts and prayers go out to you all and I think working together, we're going to get through this thing.

Thanks, everybody for being with US today, I know, it's an extra long call, but I hope we gave enough color around not only southern situation, but the national situation to give everybody confidence in the next steps forward.

Thanks, everybody talked to you soon.

Operator, that's the conclusion of the call.

Thank you, Sir ladies and gentlemen. This includes the southern company first quarter 2020 earnings call you may now disconnect.

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