Q3 2020 Southern Co Earnings Call
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Continue to stand by your conference call will begin momentarily. Thank you.
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Good afternoon. My name is <unk> and I will be your conference operator today at this time I would like to welcome everyone to the Southern company third quarter 2020 earnings call.
All lines have been muted to pay.
Event any background noise.
After the speakers remarks, there will be a question and answer session.
At that time, if you have the question Chris the one followed by the four new telephone.
So at any time during this conference you need to reach an operator press star zero.
As a reminder, this conference is being recorded Thursday October 29 2020.
I would now like to turn the call over to Scott Good now.
Investor Relations Director. Please go ahead Sir.
Thank you Ben good afternoon, and welcome to Southern company's third quarter 2020 earnings call.
Joining me today are 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 will provide 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 that Southern company Dotcom.
At this time I will turn the call over to Tom Fanning.
Thanks, Scott Good afternoon, and thank you all for joining us as you can see from the materials. We released this morning, we reported strong adjusted results for the third quarter ahead of the estimate provided on our last conference call.
COVID-19 related demand impacts have moderated from the levels. We experienced earlier this year and given results through September we expect adjusted full year earnings per share to be at the top end of our guidance range.
Throughout 2020, our customers and communities have been faced with historic challenges and our businesses have continued to demonstrate resilience in serving and supporting them well.
Well COVID-19 has resulted in many employees working from home nearly half of our employees staff essential facilities and perform essential functions, which means they have been in the field and in the case of our gas employees and homes and businesses working daily to ensure the delivery of clean safe.
Reliable and affordable energy to our customers.
Safety and health protocols have never been more important to protect both our employees and our customers.
Despite extraordinary circumstances in 2020 as a result of the COVID-19 pandemic and an exceedingly busy storm season, our business model has demonstrated substantial resilience as weve delivered outstanding service to customers provided excellent operational reliability and.
Gee strong year to date financial performance.
As we reach completion of Vogtle unit, three and continued significant progress on unit four we will set the foundation for an expected increase of.
Our long term earnings per share growth rate.
And improvement of our cash flow and a.
Dramatically improving dividend payout ratio.
Let's turn now to an update on plant Vogtle units three and four.
We continue to focus on meeting the November 2021, and November 2022 regulatory approved in service dates and recently updated our work plan for the timing of unit Three's remaining major milestones.
Based on our current work plan, we now expect that the in service date for unit three to be during the third quarter of 2021.
Ahead of its November 2021 regulatory approved in service date.
Now we continue to utilize and aggressive site work plan for unit four as a tool to provide margin to its regulatory approved in service date of November 2022, with the current targeted in service date of June 2022.
From a cost perspective, Georgia Power's share of the total project capital cost forecast is unchanged at $8.5 billion.
With unit three direct construction approximately 94% complete our expectations around the scheduled ranges for reaching major milestones continues to narrow.
For about three years and as we have discussed on prior earnings calls we have used an aggressive onsite work plan to drive productivity and as a tool to provide margin to the November regulatory approved in service date for unit three.
Now this strategy has served us well in motivating the workforce advancing construction progress providing for early testing of systems and components and facilitating earlier identification and mitigation of risks.
Indeed, this tool has created margin to the November regulatory approved in service date.
Considering the current pace of construction and milestones reached to date as well as assumptions for future productivity. We are shifting away from the use of an aggressive site work plan for unit three to a work plan that reflects our current expectations.
Under this updated work plan, we anticipate our next major milestone hot functional testing to start in January 2021, followed by fuel load in April of 2021.
That work plan projects in service as early as the third quarter of 2021, which provides approximately two to three months of margin to the November regulatory approved in service date.
It is important to remember that for unit three we expect hop functional testing could start as late as the end of March of 2021 and fuel load could occur as late as mid year of 2021 and still support the November regulatory approved in service date.
In mid October we successfully completed cold hydro testing for unit, three which was a major milestone for the project since our last call. We also completed civil construction on unit three shield building started to successfully operate the unit three reactor coolant pumps for the first time.
Placed the unit three turban on its turning gear.
As the site prepares for its next major milestone hot functional testing critics.
Critical areas of focus remain the timing of system turnovers, and electrical and subcontractor performance.
While the site is experienced and manage through two waves of COVID-19, we expect the pandemic will present continued challenges as we work towards completion.
As we approach our functional testing.
System turnover and testing activities for unit three continue to increase.
And in the coming months, we expect Itex of Middle and review to accelerate.
Southern nuclear and the NRC staff have been working together for years on a plan that provides southern nuclear the ability to submit the necessary documentation.
And allows the NRC ample time to conduct a review of that documentation prior to unit three fuel load.
All of the you lie ends or the uncompleted hi Tech notifications have been submitted and accepted by the NRC for both units three and four.
And nearly 40% of the 399.
Pat closure notifications, we call. These IC engines have been verified as complete by the NRC for unit three.
At this point.
Hi Tech progress is consistent with our expectations and milestone achievements.
Leading up to high functional testing, we plan to submit over 100, Ipi tax for review and verification to the NRC.
Followed by approximately 100 more during hot functional testing and approximately 50 more as we approach to fuel.
We expect that all unit three itek and IC ends will be submitted and reviewed in a timely fashion to support units refueled.
The Vogel three and four operations team continues in preparation for initial fuel receipt later this year and an increase in pre operational testing.
The team successfully completed the pre startup safety review by the World Association of nuclear operators highlighting the sake. These strong safety culture, we have developed to position the project for successful startup and operation.
We also completed the and RC evaluated emergency preparedness exercise.
And received 62 reactor and senior reactor operator licenses the first operator licenses for units three and four.
This number represents full staffing.
For both units.
These accomplishments set the stage for the site to achieve approval for unit three fuel load.
Now, let's turn to costs.
Based on our most recent assessment there is no change in the total project capital cost forecast in the third quarter of 2020, Georgia power allocated approximately $5 million of the construction contingency to the base capital forecast, reflecting cost risks.
Created with construction productivity and field support.
And recall the estimated cost of the time between the site work plans and the regulatory approved November in service dates or a guess.
Schedule cost margin is embedded in Georgia Power's base capital forecast following the updates to unit three and unit four site work plans approximately $90 million. This schedule cost margin was utilized the remaining scheduled cost margin and cost contingency combined.
And represent approximately 18% of the remaining estimated cost to complete.
As we have said, we expect to utilize all contingency funds as we progress towards completion of the project.
Through the remainder of this year and into the first quarter of 2021. The Vogel team will continue to focus on the final phases of unit three construction system turnover and testing activities I tax of metals and our transmission our transit transition into plant operations ahead of unit Three's.
Regulatory approved and service date.
At the same time, a ramp up in construction production is underway for unit four related to its major milestones in 2021.
While there is still uncertainty our current expectation is that we'll reach completion for unit. Three ahead of the November 2021 regulatory approved in service date.
Drew I'll turn it over to you now for an update on the financials and our outlook.
Thanks, Tom and good afternoon, everyone I hope you all are well.
As Tom mentioned, we had a very strong quarter third quarter, adjusted EPS was $1.22 cents per share.
While 12 cents lower than last year to seven cents above our estimate for the quarter.
One of the drivers of this variance was significantly warmer than normal weather in the third quarter of 2019.
The weather impact relative to normal for the third quarter of 2020 was was a positive four cents last year was a positive 14 cents, hence the variance.
In addition, we had a modest decline in third quarter 2020 sales due to cope with 19, resulting in a nine cents negative impact.
Which we mitigated through diligent cost control and constructive state regulatory actions at our utilities.
A detailed reconciliation of our reported and adjusted results is included in today's release and the earnings package.
Year over year year through September the dynamics are very similar for the first nine months of the year adjusted EPS was $2.78 per share, which is six cents lower than last year. This.
This year's milder temperatures through September resulted in a 21 cents variance in EPS when compared to 2019.
COVID-19 impacts year to date have reduced income by 20 cents and whether any impacts compared to normal added an additional eight cents. Despite these headwinds we have so substantially mitigated both weather and COVID-19 impacts throughout 2020, allowing us to exceed our estimates on an adjusted basis.
In each of the first three quarters.
With these solid results through September we expect full year adjusted earnings per share to be at the top end of our guidance range of $3.10 to $3.22 per share.
We continue to assess the financial impacts of COVID-19 on our business for the third quarter. The weather normal impact of COVID-19 reduced sales by 3% in the aggregate and slightly better than our baseline expectation.
As you would expect we're still seeing a slight uplift uplift from the residential sector due to people working from home.
The trend for both commercial and industrial customer classes is markedly better relative to the trough last spring. However, the timeline to full recovery for both sectors remains uncertain.
Factoring in impacts across all customer classes year to date, our non fuel revenues came in slightly above our forecast.
Our retail sales projection for the full year is unchanged with the expected overall decline in the range of 2% to 5% on a weather normal basis.
Based on results to date, we expect total Cove at 19 impacts to be approximately $300 million for the full year.
In addition to sales we are continuing to monitor customer arrears and the potential for an increase in bad debt expense. We have worked closely with customers across our regulated utilities offering special payment plans for those with past due account balance.
Customer arrears have actually trended better than anticipated across our operating companies and our liquidity position remains robust.
Constructive mechanisms have also been put in place by the commissions in many of our states, allowing us to address COVID-19 related costs and bad debt expense in future regulatory proceedings.
Additionally, through the first three quarters of 2020, we are on target to meet our annual capital deployment plans.
Turning to a brief capital markets update during the third quarter Southern company in several subsidiaries raised an aggregate of $3.4 billion locking in record low coupon rates, increasing our liquidity positions and allowing us to redeem $1 billion of higher rate notes at the parent imply.
Importantly, recall, we still forecast cast no equity need until at least 2024.
From a ratings perspective during the third quarter Moodys upgraded Mississippi powers senior unsecured long term debt rating to be double a one.
Fitch also upgraded Mississippi powers senior unsecured rating to a minus last.
Lastly, Fitch moved its outlook to stable for all issuers, except Georgia power. These.
These positive changes demonstrate the continued commitment of southern company and our operating companies to financial integrity and strong credit ratings, both of which provides significant benefits to customers and investors.
Before I turn it back to Tom I would like to highlight our energy mix trends so far for this year through.
Through September nearly one third of our energy supply was from zero carbon resources and coal represented just 16%.
We continue to project that for the full year generation from coal could be below 20% for the first time in modern history.
Last month, we published a supplemental carbon report port called implementation and action toward net zero in which we outlined our approach to achieving our goal of net zero by 2050.
We've made significant progress toward this goal and currently project that we will achieve our 2030 interim goal of a 50% reduction in greenhouse gas emissions.
As early as 2025.
At a high level, we expect our path to net zero to be comprised of several key elements, including continued coal transition utilization of natural gas to enable this transition further growth in our portfolio of zero carbon resources negative carbon solutions, and hence enhanced energy efficiency initial.
Lives and continued focus on R&D for clean energy technologies.
We do look forward to discussing these endeavors with you as we continue to Decarbonize our fleets in the years ahead.
With that Tom I will turn it back to you. Thanks drew.
Adding to your comments and reinforcing the notion that southern as the industry leader in research and development.
The United States Department of Energys office of fossil energy and the National Energy Technology Laboratory recently renewed an agreement with southern company to operate the national carbon capture center located in Wilsonville, Alabama, who this 140 million dollar agreement Southern company will continue to manage.
Page and operate the research center for an additional five years over the past decade, the national carbon capture center has successfully advance the wide range of technologies toward commercial scale, while improving performance and reducing cost.
Southern Company is also partnering with every and gas technology Institute to sponsor the low carbon resources initiative to accelerate the development and demonstration of low carbon energy technologies and we recently received the Edison Award our industry's highest honor from the Edison Electric Institute for Southerns work.
Involving energy storage research and development.
Through the energy storage Research center and industry will bide hub for battery energy storage technology testing evaluation and large scale demonstration in Birmingham, Alabama.
Southern company is providing leadership and technical expertise to advance energy storage delivering a decarbonise future will require an influx of advanced technologies. So it's essential that we leverage collaboration to find an advance those next generation and transformational solutions.
Despite unprecedented circumstances in 2020, our company and employees continued to demonstrate exemplary operational performance, which has translated into solid financial performance for the year to date.
As we move ahead key priorities remain operating our utilities at best in class service levels, demonstrating cost discipline and working diligently to bring Vogel units three and four online by the November regulatory approved in service dates we believe that southern company is well positioned to succeed.
Actually execute on these fronts and uphold our goal of achieving an attractive risk adjusted return for our shareholders.
In closing earlier today, Georgia power announced that Paul Bowers plans to retire concurrent with unit three fuel load expected in April 2021.
After a remarkable 42 year career with southern company.
For more than a decade. He has led Georgia power to be the Premier Energy company. It is today.
From industry, leading storm response, and customer satisfaction to the growth of a diverse energy portfolio and a deep commitment to the communities. We serve he has positioned the company for continued success. He has led the company through the construction of Vogel three and four and we'll be here as we continue progress at the site.
Right and began loading fuel in unit three.
The impact is had on our company its employees, our customers and our communities and the state of Georgia is a measurable.
At Southern company, we have strong leadership across our system and operating companies fostered by our commitment to cross functional training and development. This is how we continue our longstanding tradition of effective succession planning and sharing we always have strong leaders ready to continue serving our customers I am.
Very pleased that Chris Womack, our executive Vice President and President of external Affairs will succeed Paul Kris.
Chris will serve as president of Georgia power effective November one 2020, and assume has additional responsibilities as chairman and CEO upon Paul's retirement.
Now we knew it would take a remarkable leader to follow after Paul and we are confident Chris is that leader.
With extensive experience leading at the national level, Chris has remained very active and well known in Georgia and across the south here.
He also previously served as Chief production Officer, and head of external affairs for Georgia power.
His depth of experience in the energy industry government and regulatory affairs and the state will be incredibly valuable as Georgia power work to continue providing clean safe reliable and affordable energy for millions of Georgia.
More importantly, Chris leads with a passion for people the company its employees and its customers and its communities.
Our an awfully good hands.
One final note.
We have thousands of people today working to restore power from Hurricane data that came across New Orleans, but then hit the bulk of its theory in Mississippi, Alabama, and even here at Georgia, where we experienced wind gusts in excess of 60 miles an hour.
Hi report as of this call was that at our Max we had around 1.2 million customers out and as of.
One o'clock, we're now about down to 1 million customers, who have already made some progress in the days ahead, I know well that we will continue our excellent track record of restoring service quickly and not only providing electricity, but hope to the communities we serve.
So thanks to those people for their efforts and I know they'll work safely.
So thank you for joining us this afternoon.
Operator, we're now ready to take questions.
Absolutely if you would like to register for a question Presto, one followed by the four on your Touchtone phone.
Yes, three Tiltrotor technology requests. If your question has been answered. Thank you liked with Jonathan Thanks, Jason. Thanks, So one followed by the three lending.
One moment please for the first question.
I guess first question comes from the line of Julien Dumoulin Smith with Bank of America. Please go ahead Sir.
Hello, Julian Thank you to join us.
Hey, good afternoon. This is actually a rich year for doing how you doing today.
Oh, Hey, rich glad to have you as well.
All right. Thanks.
Just curious if you can provide a little bit color compare.
Comparing the timeline for the hot functional testing from from start to finish with what you've allocated looks like roughly 60 days compared to the pair China plant where it.
Seems like 77 days is incented in the news and I now might be a direct comparison, given labor and other critical items, but.
Just curious if you can provide a little context on the differences there.
Yes, well honestly the 77 days I think appeared in a magazine article Weve research that we can't say that where that number came from.
That Maben magazine, we I'll just say this.
You know we've had people at the plants.
And so.
Site, Sanmen and Haiyang young.
As they went through these procedures, we had our own people there we may be able to Westinghouse there and in fact, the people from Westinghouse and went through startup and functional tests and all of that are now with us at plant Vogtle three and four.
The people from Westinghouse endorse our plan to complete.
This test as we have laid it out.
So I don't know where that number comes from.
We essentially plan for from the beginning of hot functional test to kind of fuel load about 100 days. That's comprised of 45 days of starting the test and running the test and then 55 days from assessing kind of where we are at the end of functional.
Test to fuel load that will include things like filing the last I attacks and as we mentioned I know theres been some conversation about the pace of Ipi tax.
Recall, you don't file tax every month, just because of the passage of time, we file tax associated with the turnover of systems associated with the accomplishment of milestones and so as we laid it out there is about 100 ipi tax round numbers that before.
Before we start hot functional test that we will file during the attack Thats. Another hundred following the test before fuel load yet another 50.
So so thats very clear I think the other thing that I don't know, but I'm just guessing here may confuse how you start and began or the duration of a test we are very disciplined with what we're calling the start of hop functional test and that will involve the pressurization of.
The reactor area.
Theres a lot of activities that I guess conceivably you could say our pre start activities you could say began hot functional test and maybe thats, where they can up a 77, but.
So let me just finish it with the folks that were there in China.
Our onsite here and they have been constructive and endorse our plan as we put forward.
Got it that's very helpful. Appreciate the added a clarifying remarks there.
And then just maybe bearing over to units for.
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I know you guys have indicated here that targeting June 2020.
That NBC and 23, it looks like it's just slightly slipping behind the November schedule in terms of percentage that fleet.
A month just curious if you can provide a little bit of color there on getting back on track.
Especially considering that there are many milestones needed that's in play with unitary here.
Yes, Thanks, Richie and in fact is really not off track. It by plan. If you recall when we went back to the onset of the co that virus at the site recall, we went through essentially a lessening of density at that site and reducing personnel from say 9000 to 7000 that.
Also required us to Resequence work, which we disclosed along the way here.
One of the ideas that we put into place was to borrow as we brought the numbers down was borrow some personnel from unit four and put them on unit three so we can maintain the progress of unit three we intentionally brought down the productivity of use.
For for a period of time.
Now in order to achieve.
November by no in order to achieve the aggressive schedule for unit four we need about 1.4% per year per month in order to hit June.
What we have done is in October achieved 1.4% on unit four were.
We're going to add more people as we finished three that will move over to the other unit and drive that number up so yes. It would appear that for the months of say July August September that it looks like we really went down on unit four we did that was part of the plan.
And now we're ramping back up and I think our productivity in October is evidence of that.
Sort of an odd concept than you probably shouldn't use.
Uh-huh reduced complexity when you are referring to a nuclear site, but I think it is completely fair to say that as we move through unit three construction and.
And move the principal focus to unit for that we'll absolutely see improvements in.
In productivity over time, it's just the natural course of construction and just recall too that as we went through unit three we had lots of learning.
And so one of the things that we've been able to do on unit four is apply those learnings receives sequencing work I remember initial energization. We did early on three we're going to push that on four and improved productivity. There because it was frankly, a lot of turn on and turn off of equipment involved in that.
Richie as we move into or move through.
Functional testing will start to provide you probably in the first quarter of next year.
Good sets of schedules for unit work completion and construct construction completion and I really like on the material. We gave you today I guess its page six is just a great visual of where we are on unit three which shows the aggressive timeframe. It shows the November timeframe and there. It shows our actual sure enough. If you look at where we.
We're projecting our expectation to be and our expectation actually has an additional 30 days that we already had 30 days of the.
Contingent scheduled contingency in there we actually added another month in order to hit the end of the third quarter. I think we will provide that kind of information that drew is suggesting for unit four now.
Got it that's that's very helpful. And then just one more if I can slip at end.
I guess in terms of the operational data points for unit three in between now and hot functional testing I know there is some.
Contract of work left to be done by anything that we should be focusing on here in the next couple of months.
Yet.
I think theres kind of three things that I'm very mindful of right now.
In terms of actual construction feel pretty good about that.
I really think that our big focus and we have a swat team assigned to this involve.
Involves kind of the the nomenclature of the paper that is making sure that the as built condition of the systems that we will turnover actually reflect are reflected in the engineering plans and so if you want to just broadly call that make sure. The paper works at the as big.
Built conform to the engineering and that that goes into the high tax as we submit them don't underscore that and that's a big deal don't underestimate that second we.
We have said.
Consistently really through the past six months or whatever electrical productivity at the site continues to be a pacing factor. We think we have a reasonable schedule to do that.
And then thirdly, a sub contractor performance and.
I feel confident we'll get there but.
But it's one of the three areas, we have particular focus on now.
And what do we mean by that is like insulation like the elevators need to be insulated before we can go through high functional test. So it's things like that it's the seals on perforations through walls to make sure that they are tied up it's it's a whole lot of nits that are involved in making sure we can get to hop functional test.
Effectively those are the three things like it's the same again, the paper electrical and subcontractor performance.
All right perfect. Thanks, very much so.
Thank you.
Thank you for your question continuing on our next question comes from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.
Hello Shire.
Good morning, how are you guys don't.
Fantastic how are you.
Not too bad to Doug you sound like you're recovering fully so thats good.
Yes.
Absolutely a couple of.
Just a couple quick questions here. So the cost contingency in this schedule cost margin came down to 18% from 20. When there was replenished on the second quarter call. So 91 million and scheduled cost margin was used during the quarter as you sort of highlighted on in your prepared remarks, how should we sort of think about.
The shape of the remaining contingency going forward for the remaining months is it should we think about it more front end loaded or vice versa. As we kind of look to monitor the amounts she'll be utilizing so just maybe.
For us trying to assess if you're kind of on track or not over the next several months as we are trying to monitor the contingencies.
Yeah I mean.
Look I think we'll get there in terms of everything we know about cost right. Now we think we'll use a contingency and we see no reason to increase that right now.
One of the things that gives us a lot of comfort if you recall the go back to the call where we increased.
The estimated cost to complete we actually funded through contingency a lot of risks.
Both for unit three and for unit four so the yield the landscape. If you will a very ability with respect to cough has really been reduced now.
Is there a chance that we could need more eventually sure. We don't know we're continuing to monitor Cove it.
The estimates that we have given you so far and Moreover, the estimated time of completion that we now have guided you to does take into account our experience encore.
Uncoated.
Could co good get a lot worse Act conceivably.
But with the pace of co bit impact that's the kind of estimate we produced going forward.
Sure you asked a little bit about time, and so one of the ways that I've been thinking about this right.
Look at fuel load the cod, our budgets our schedules are sort of 145 days or 144 days and we plan for something that's probably more like 110, if you compare those to the Chinese averages I think they were 138. The best was 112 I think our planning assumption.
It's around fuel load, the cod or very very consistent with global.
Global experience, maybe put it in that term and so the answer to your question may be is likely in the very near term that will understand where we fall between the site schedule and the.
Regulatory in service date for unit.
Yes, there is the cod thats of kind of scheduled breakage right right, we kind of watch that.
No no it's somewhere in October November it somewhere in there we have funded that so we'll keep our eye on that as well if we ever slip past the third quarter substantial way I guess that could have an impact on costs.
Got it thank.
Thank you for that.
Just maybe just shifting from Vogel for a second and just.
Just looking at the backdrop.
Obviously narrowed your forecasted load impact and the impact on revenues for the year. Just maybe how are you sort of thinking about the recovery into 21 across the territories. We I mean, we've seen in the reason why I ask is we've seen in this space.
Several players that essentially have assumptions that are a lot more conservative E. Assuming a gradual recovery versus a V shaped recovery, but the reality is that recovery is a lot faster than what's embedded in plan and any sort of economic sort of forecasting there. So what do you think it's Tom what are you seeing as we.
Head into 21 around that.
Yes, so look.
I guess one co bid have we gave the estimate of two and a half to five.
Percent load reductions I'm guessing now revenue reduction I'm guessing now we're going to come in around three 250 million to $400 million. We're we're projecting that around 300 million.
So.
I think the estimates that we are using assume about a mid year recovery.
And we are expecting since were down for the year, probably what drew 3%, yes on revenue that we're going to recover back about 3%.
Now that puts us flat to 19.
But I would assume and if you watch all the stuff on squawk and all that this morning.
That kind of following what people believe about GDP.
So thats kind of my expectation drew yes, the only.
Nuance I'd say as we came out of the recovery a little bit came out of the pandemic from.
From its depth, a little bit faster than we anticipated, but the duration may be a bit longer. So that you integrate that and you get the sort of 3% for the year.
We see a continuation of that through 2021, I think the mechanisms that we put in place with regard to cost control have been very effective and will serve us very well into next year, we're likely not to see a cost base for the business thats materially different than 2019, and so I think we've got a lot of.
Pathways should the pandemic proved to be.
Depressive revenue the other important thing to note, though and I think it's in one of our slides probably paid 11 is that the mix of.
Impact has been very different a little bit different than what we anticipated residential is quite strong commercial all was much less than what we had anticipated although still negative and industrial has been a little bit deeper than we thought but as Tom talked about this morning on squawk box eight of the 10.
Measurements that were taking within the industrial sector are showing generally positive signs serve expansive signed through the third quarter, Yes, and so you. Let me just repeat that and a year over year all down all these and segment, but as I said this morning, the first derivative the momentum statistic would show.
Eight of 10, improving second quarter third quarter and that gives us the opportunity correct something I don't know.
On live TV every now and then you have a frank ramp.
Becky ask me.
Which one was down and which one was flat and for some reason I said chemicals was flat chemicals was down heck I knew that chemicals was down and that was the only segment down.
Petroleum was flat so I just misspoke on the call and said that chemicals was flat chemicals was the only one down.
Got it the rest of the answer was Uh huh.
Got it. Thank you and then just one last one for me if I may just shift are annoying and just thinking about nicor.
Obviously, the policy down there is a bit of a disaster, it's a mess and it's more of an electric issue versus the gas issue, but I know obviously under Pritzkers agenda, you did highlight a repeal of sort of the equipped that you guys have been utilizing.
Just love to get your thoughts here would this mean you find yourself in more frequent rate cases are you guys seeing any sort of traction with this part of his agenda.
Yes, so certainly supportive of anything that the governor makes as a priority within Illinois, what I would say about it is that our quip is a little bit different than what they have what they experience on the electric side in that the way. The mechanism works you have to move in rate case, something out of the rider into primary.
Rate base, and so we actually do that with quite a bit of frequency. So that we can.
Absorb the continued construction under what we call Q IP and so even if there were a change at the state level I don't know that it would necessarily change our behavior materially in the way that one we construct in two that we seek recovery from customers.
Got it terrific. Thanks, guys congrats.
Thank you appreciate it.
Thank you and our next question comes from the line of Michael Weinstein with Credit Suisse. Please go ahead.
Hello, Mike I'm glad to have you with that.
Okay, yes glad to be here.
Hey, when do you think you'll be ready to quantify that higher expected earnings growth rate that you mentioned after vogels and service and what would be the first priorities effort will be the first priority for use of cash flow to achieve higher growth rates.
Oh listen I think a lot of this is baked in let's just kind of we're going to get you a great detail as we historically do.
In our.
End of year earnings codes, I guess drews in February.
But it's stuff that we covered in the path and therefore I thought it was okay to foreshadow. It as you start you guys know that.
There is essentially a penalty rate in which a lot of the Vogel investment is earning right now and we've still been able to stay within our 4% to 6% growth rate, even with Vogel under a penalty rate.
The worst year for that penalty rate frankly is 2021.
As we emerge.
From clearing Vogel into service and that's why we thought it was worth talking about now that we're estimating we are expecting vogel to clear end to end service in the third quarter of 2021.
From 2021 on we start to have large increases in.
Earnings per share and in fact.
The numbers roughly are as we move from a debt rate roughly the penalty rate associated with Vogel into a full mix of capital. The net income effect is over $200 million.
Now, let's think about that I don't care, whether you use 2018 as your baseline or 2021 as your baseline our earnings per share growth rate goes way up.
Our capital.
Our cash our cash flow goes up significantly.
And as you would expect our dividend payout ratio goes way down and so people. After me, we'll have the decision as to what dividend policy they want to carry on from there but.
We've said this on earlier earlier calls, we'll give you a great detail.
In February about all this.
Chris.
And thinking ahead after the post election environment. I mean are you seeing any new willingness on the part of environmental us to accept nuclear as part of the integral solution to their global warming problem and are you still willing to consider additional new nuclear construction.
After this is the African considering all the hard earned valuable experience you guys have gained over the years.
Hey, Mike.
Non on time.
[laughter], Hey, Hey.
I want to finish up on the Capex comment too on the last conversation, we just have it yes absolutely.
I would say one of the great thought leaders in America.
A guy that was approved 98 to zero by the Senate.
As as Secretary of energy was there any monique he's on our board.
Published extensively I think he has credibility on both sides of the aisle, it's very clear that nuclear needs to be a part of this nations energy profile going forward and I think we suggested on prior calls that as a matter of national security.
For the United States and maintain a profile of.
Consistent nuclear development I think it's important to us all and.
And so it maybe you just saw recently United States signed a pact with Poland to think about new nuclear development. We know that there is new nuclear development considered under the kingdom of Saudi Arabia and Hugh eight.
So my sense is the United States will continue now.
When we think about our projections and we have some pretty clear plans about how to transition. The fleet. Our next nuclear unit is probably in the Thirtys to Fortys would be my guess so back up you know how many years eight years before you start those to get them in service.
So somewhere in that timeframe would be my my sense okay.
The other thing that is important on new nuclear as some of the things that we are spending a lot of money on a lot of brainpower, but working with the we bill gates, he and I are on.
Energy innovation.
Forum or whatever it is.
American Energy Innovation Council of this idea of of.
Kind of the next generation of nuclear that is the nuclear fuel may have the physical characteristic of not being able to melt down and therefore, you don't need all the containment structures and therefore, you drive down capital cost and and operating costs I think theres lots of ideas Esam ours look.
This nation has to stay invested in nuclear.
Now in the next five years 10 years, I don't know, whether southern will be or not thank goodness for the benefit of the United States. We stayed involved.
But I think we're going to have to stay there eventually.
Hey, one last thing I, just wanted to say on the future Capex and the future financial plan.
As I finished talking I'd.
Kind of had a hint of what do you have to do my answer was we have to finish Vogel.
If you look at our Capex are provided in the slide it doesn't really have big placeholders for new stuff.
What you see in there to TNT capex in some relatively modest generation Capex, what we're showing you in my view is a pretty conservative modest case theres plenty of room to do more to execute on $500 million a year placeholders that southern power for examples in renewables.
We don't have that so when we show this forecast is a conservative forecast in terms of what we must do to achieve.
Once you make sure you understand that.
Yes, I mean, thats kind of what I was asking so just curious on what other kinds of projects you might be thinking about.
I'll leave it on I'll I'll see to further questions. Okay. Thank you.
I think the answer to that question, though is relatively straightforward. If you look at the content of our constructions over the next five years, something like 38 to 40 billion dollars' worth eight or $9 billion per annum. Most of that construction is being done in the transmission distribution segment, which is I think.
Highly important component of our mix and a very durable asset base and then over the next 10 years, we'll do a very large content of environmental remediation and so as we move through those will the next generation of spend is likely to be modernization of the generating fleet and so it's pretty easy to kind of sauce out whats the potential.
Neutral per cap ex is over a longer period of time young.
And I want to assure everybody on the call we come up with growth rates, we don't plug capex in order to solve to a growth rate. What we're showing you is a reasonably conservative posture with respect to investment and so therefore, there is probably upside.
Thanks.
You bet.
Thank you for your question.
Our next question comes from the line of Angie Storozynski with Seaport Global. Please proceed.
Hello, Angie how are you.
Hey, good. Thank you so two questions.
So post 43 years that Georgia power over the not unimaginable, but that change.
And the leadership is happening.
At the time when I know you're reading reports on the commission you have elections that potential changes that that directly.
So how should we think about it.
The ongoing support for the project given that the elections and that the management's home center to file.
Oh, you bet and thanks, and Thats a natural question. So thank you for asking look Paul I'll turn 65 next year. He has had a terrific track record of performance and he works around the clock.
We fully bless Paul's desire to retire and spend time with his grandkids He's got to.
Home on the on the Beach there in Pensacola is got a farm and AG.
Alabama, he is absolutely entitled to enjoy his time.
In retirement, when we think about the right time to do it well we could have waited till later and 21.
But you know what.
All of a sudden in 22 now we start filing the next triennial rate case.
We start considering issues like prudent and we thought it was a lot smarter to have somebody in the saddle well in advance of those issues not as they are happening. The other thing that I know, Paul and Kris both did a lot of media today.
I think it expresses a tremendous amount of confidence by Paul and US all to make his retirement effective with fuel load on three I think that express is a lot of confidence in our ability to execute from fuel load to in service.
And let me remind you Chris Womack as President external affairs, he had a very broad palette of responsibility Chris.
Chris has been involved in all of the regulatory.
Execution of filings and monitors and everything else Paul served as the Chief production Officer. He was in charge of generation at Georgia power for part of his career. He was also in charge of external affairs at Georgia for part of his career.
So what you're getting.
Is is arguably the top external officer, we have in the system now in the CEO role at Georgia, He will do a terrific job.
Okay. Thank you my second question is down so what you've always tell about that that's going to be some.
A couple of weeks of additional works between the end of the call Patrick testing and then depending on how functional thats from now I was under the impression that were talking maybe.
Four weeks, it's a little bit longer than that.
Thing that that you guys identified during that call hydromorphone that elongated period in between those two sets.
Oh, Angie no nothing at all any of your co hydro testing went fabulous and in fact kind of funny you know we got to this argument not argument discussion 77 days versus whatever.
We started doing free cold hydro test kind of well in advance of the final cold Hydro test such that when we finally did the cold Hydro test. It took just a shade over one day to complete because we've done all this work in advance okay.
What we have done with the expected schedule.
Is to give more time for some of this pre work so that when we get to hot functional test it will go smoothly some.
Some of that pre work in valves.
The filing of Ipi tax 100 kind of before when I talked generally about paper.
That is making sure the as Builts.
Nate the engineering specs and therefore provide us a very easy way to use the EU and process, where they already have been approved to drop in the values and.
Get things done on a very systematic way at the NRC. It gives us more time to deal with the paper. It gives us more time to finish with the electrical our pace of electrical is not dramatically different there is a minor increase but it is it is not dramatically.
Different than our experience that we've been having so far so what you see is the absence of an aggressive plan.
It should lower the risk of getting to that date, and then executing once we do get to that date.
Okay, and now complete the changing topics given that in the in the 32nd it seems like we have that some sort of asset.
Strategic update on with everyday I know you guys are busy went down less vocal but.
Do you have any comments about.
Potential ongoing consolidation and and the electric utilities industry, especially in the southeast should we think about it that one sold locally is online that's when you're ready to go ahead and.
And take home type stuff.
Future growth through acquisitions.
Well now that's a loaded question you know.
And Andrew you've been with us for some time, so I'm going to give the old responses. It remains true. It is a fiduciary responsibility of all Ceos.
To seek out opportunities buying and selling anything that will accrue through to shareholder value is something we should do okay.
And we have demonstrated that I think over the years. The simple examples for us would have been.
Southern company gas, formerly a Geo resources was a great buy by US and then when you think about the strategic sales that we've done since then be it Elizabeth town, Florida City gas Gulf power, if it made sense.
We bought at attractive levels and sold at levels that were unprecedented from a multiple standpoint, both in the gas industry and the electric industry and so we will continue to do that going forward. The big caveat that you rightfully point out is this is.
Is that throughout probably the remainder of time to complete for Vogel three and four.
Makes a lot more sense for us to be doubly focused on getting that done well and executing after.
After that we will have lots of opportunities to consider thing, but I would argue even after vogel, we will still maintain that discipline.
Our factory do you want anything else.
Okay.
Thanks.
Okay. Thanks, Andy Thanks for joining us.
You bet. Thanks.
Thank you continuing on our next question comes from the line of Sophie Karp with Keybanc. Please go ahead.
Hi, how are you doing.
Our right to complain hope you guys have been well also congrats on a strong quarter and Banca frankly than men.
Well a lot has been discussed already but maybe if you can give us a little bit more color on.
Now that you've done with cold hydro and you're moving forward. The hot functional testing what are some of the factors that can kind of pushed that date in between January and March as you outlined makes that trains. So what what are the factors that can push it sooner or later within that range that we should maybe follow or think about yes.
Sophie if it was me I'm, just giving you my judgment on this call right now so I laid out three risk areas than it would be broadly the paper.
And then it would be electrical productivity and then it would be subcontractor performance.
Probably did those in order in other words.
Maybe the biggest risk factor would be making sure that the as built condition conformed with the engineering plan.
And making sure they are for that the process, we've laid out on I tax will work well for theoretically.
If there's no material difference between what we build and what the engineering plans call. For then you should just be able to drop the values in other words, the whole you lie and process provided for the NRC to already say that the test was there the process to get to the test was fair and therefore, while they really need to do with assess the value.
Of the test that's why we're able to accomplish so much in a short amount of time.
So I think it's really and I think the as bill condition is in conformity with the engineering, but you have to go out and prove it you actually have to have what we call.
Field non manual labor on the part of backfill and southern to work with our testing I tax team to assure that we have conformance in the test.
You know I think we all get high focused on turning the wrenches and connecting the electrical equipment.
That is really important and I can tell you we have a whole room that vote and we were we've been there gosh I guess every week now here at the last bits of this construction effort.
Making sure that Thats going to go well.
I would really focus on that one right now, but look the others could two we could have a lack of productivity. We could have subcontractors that don't perform well those three areas I would really focus on the paper right now.
Great. So it sounds like the cold Hydro test then went well like you pointed out and so nothing that you've learned from that will gather from that could be.
Could potentially delay has functional test and it sounds like thats not the case.
Oh Sophie know it went great in fact, when we finally ran the test part of those hydro with Depressurize all this equipment.
There's always a tolerance in a test.
We went right through.
All the pressurization activities and only achieved something like a 10th of the allowable variance is I mean, we killed it on that test it went exceedingly well.
Terrific terrific and one last one just to clarify.
The ice pack approval should we expect them to sort of coming in batches or kind of.
And the more of it.
Straight line timeline for the completion is that something that that we should be tracking.
It does feel like batches, yet is lumpy and recall.
I'm sure, it's our fault, but there was some some idea out there that we should see ratable monthly.
That's not it.
Everything is associated with a milestone. So there are systems that we have to finish in order to start hot functional testing as we finish those systems, we will file our attack those are the first hundred.
There are systems that we will test successfully through hot functional that's the next 200 and then recall when we finished the test essentially you dismantle a lot of the equipment and checked to see how it performed actually opened the engine. If you will and look to see how the pistons in the stock I mean the sparkling.
Bugs and all that other stuff reform.
And sure enough, we'll file the final tax on that.
So it will look lumpy to you.
Got it that all right.
Hope will comment thanks, so much appreciate it.
Always good chalk and for you. Thank you for being on with Us.
Thank you continuing on our next question comes from the line of Jeremy Tonet JP Morgan. Please go ahead.
Hi, good afternoon, Hey.
Hey, Thanks revenue on here.
You bet and just wanted to I just want to think about kind of look into the future for the period after vogels completion here.
Do you see any kind of incremental investment opportunities.
That kind of come out of your net zero carbon by 2050 goal that you recently announced here and how should we think generally about renewable spending opportunities across the southern footprint in can.
Can you give us an update on the sentiment towards renewable integration across your jurisdictions here and how our commissions thinking about the integration of batteries solar here just wanted to touch base and all that.
Yes, so let's start with.
Let's start with a long term plan.
I think the United States certainly is adopting a net zero carbon posture, we were one of the.
I would argue that we were the first one to come out with low to no I think thats equivalent to net zero.
Net zero becomes important because it gives us flexibility on the very last kilowatts that we need to be carbon free in other words.
It might have been electric transportation or it might have been more carbon capture on gas generation. If we are able to make net zero technologies, either direct capture biomass, our hybrid hybrid biomass those incremental kilowatt hours at the end of the tail to get to net zero.
Cheaper.
Now.
We need to continue to invest R&D to get there you know if you look at the state of Georgia for example.
They have been.
Out there in terms of a state remember, Georgia power I want to say was called out by the solar industry as the investor owned utility of the year.
And in fact, we had no mandate to do solar.
They do it because it makes sense in the portfolio and is good for customers.
Alabama recently has considered solar and put it into a special focus in some hearings that will be upcoming.
I think even gas has some very interesting plans on net zero.
So I would argue our state.
Certainly understand the idea and our states had been so constructed in the past in terms of balancing kind of an environmental need with what's best for customers.
I think it's going to be a great place to do business and I think also.
When you consider the role of batteries.
I have said consistently.
And I know this is maybe a little bit apart from some of my brothers and sisters in the industry.
We are going to need.
Some material science advance advances in order to make batteries a comprehensive solution.
We have to incorporate not for and maybe even six hour battery technology, but seasonal battery technology recall the most.
Important renewable probably in the southeast not wind at solar and you know that during the summertime you get a pretty good.
Profile for solar generation, but as you go to the winter months, you have a much shorter period, and therefore, you need seasonal storage.
Strategies, so we got to figure that one out.
In Georgia already they have addressed concerns.
Considering batteries and solar as part of the solutions for the future, but I think for us to get where we need to be and for southern the numbers are roughly 50%.
Renewables, which is the lion's share is going to be solar we're going to need some advances in R&D on battery technology.
Thats going to make us I think get there.
Got it Thats Jeremy did that help.
Yes, thats very helpful. Thanks for that.
You bet and then.
Kind of shifting gears here.
Is there anything we should be thinking about in regards to its potential changes on the Georgia Commission as elections approach here. If there is a change how do you think Georgia Power's position I realize this is kind of a difficult question to answer but just want to know if you had any thoughts on that.
Well, it's almost impossible to answer I mean look this company has been designed to over the years to thrive in any kind of administration.
Federal level, those Trump win and the Senate win or is there a blue way I think southern company has the Optionality, if you will and the credibility if you will.
To do great under both administrations likewise in our state we have.
Inextricably.
Intertwined our operation.
With the good the well being of the communities we serve.
And I think on both sides of the aisle, whether its Republican or Democrat.
People understand that a healthy utility one that is involved in something bigger than our bottom line that we are inextricably intertwined with the communities. We're privileged to serve is a good thing for the state.
When you think about our economic development and the role we have played historically.
I think it has stayed for ever as a premise by politicians on both sides.
Georgia power is one of the great citizens in our service area. The same holds true for Alabama, and Mississippi and the southern gas utility.
No matter what happens we'll be fine.
Got it that makes sense. Thank you very much.
You bet. Thank you.
Thank you for your question.
Our next question comes from the line of Andrew lays out with Scotia Bank. Please proceed with your question.
Thanks for taking to everyone.
Thank you quick one here just in terms of coal generation. The Pie chart you show, it's really impactful and of course consistent with the strategy toward de carbonization, but.
My question is with demand down so much this year and milder weather should we think about the reduction in coal and even natural gas to be temporary in other words, if next year, we get demand to rebound and it starts to look more like 2019 would it be right to assume that you'd be running coal plants more and the skew might look similar to how.
It did.
Yes. The premise of your question is 100% correct. So let's just go through it real quick interestingly, what I love about the data point on that chart about Colby and 16%.
Half of that is one plant plant Miller, and Alabama power and it is a terrific plant highly efficient cheap energy really good stuff. So the whole risk that is one plant the entire remaining portfolio of coal at Southern company is only eight per se.
10 of our energy.
What does that tell you it does it back in the stack in other words, it's marginal cost to run.
It is more expensive than most of the gas that you see here. So what are some things that could sway it well.
One is the gas prices go up.
If there was some ban on fracking some if for some reason gas prices spiked you may see an increase in call.
However to.
Demand moves up so if you think about the.
Back of generation.
If the demand line moves to the right.
You will pick up more expensive resources, that's absolutely right and that could cause you to increase your generation of coal.
But the inescapable truth our.
That.
With environmental pressures cost pressures supply pressures.
The importance of coal is waning in the portfolio of Southern company generation.
Okay, Great Thats helpful could that get and then you bet, Yes, Yes, and then do you have sort of a pro forma or what's your latest thinking on a pro forma energy mix say in 2023, when the two nuclear units are just round numbers available.
Yes, I do.
Yeah, Let me just get my hands on it if something like this I think.
Depending on what it is a little bit of an assumption there about what happens with environmental and what happens with coal and gas prices, but I think you're going to see something similar to this 2020 mix.
Nuclear will go up a wee bit.
May be in the.
And the 2%, so maybe 19% would be nuclear or something like that gas.
Gas would drop down the marginal cost of nuclear is very cheap.
Call it depends on what happens with environmental.
And that really depends a lot to a large extent ami elections going forward.
If you have a blue wave.
It may be that we would see perhaps tighter regulation and.
Colin in importance, but we'll see the other big factor is you should see renewables increase in importance.
And I think we're going to see particularly a Georgia power.
Something like 2.2 Gigawatts of solar by 2023, it will be a big deal now whether we purchase it around it.
Renewables will continue a steady advance.
Into the future. So right now it says 15, when I took over it was zero.
And this is where the company that.
Round numbers I know this is incorrect now don't hold me to it I used to say that were a little bit less than the size of Australia, Australia is grown faster than we have but we are still pretty big as the pool point to go from zero to 15 in the time I've been here is pretty important and I think between now and 2050 getting to 50.
Is a big deal so expect renewable to continue a steady increase in the percent and those renewables are most likely to be solar rather than wind.
Okay, just to Mitch just to make sure I'm clear, though so are you seeing that renewables will be more than nuclear as soon as 2023.
I think thats a possibility sure.
You could certainly renewables get up into the 20% range, what's fun about that is to say renewables plus nuclear you know if your 20% a 19% year, 40% carbon free and recall. We've also said we set in place an interim goal of achieving 50% reductions by 2030.
I think it's going to be 2025 anyway could even be better than that and we'll see.
Sounds great. Thank you so much.
Yes, Sir.
Thank you for your question.
Our next question comes from the line of Charles Fishman with Morningstar Research. Please go ahead.
Thank you tightly around sort of all Michael.
You bet you've answered all my questions on Vogel cold at 19, I Wonder if I could just ask one sort of long range strategic question.
You have a situation where you've got this nuclear capacity coming on in the next few years, you're building a lot of solar you'll continue to build solar.
Southern is in an animal.
Mild climate makes a lot of us live up north jealous.
While in the winter.
Higher summer peak versus winter peak.
In your discussions have you thought about the fact that.
Mhm.
You do some electrification of space heating.
Because you are in a mild climate air source heat pumps or.
Efficient economical does that enter into your thinking.
With respect to net zero carbon.
Yes, Hey, Charles.
I know I catch them great for this is this notion of electrify everywhere.
Gas will have an important part in the future don't get me wrong, but switching to electricity does make a lot of sense in many cases, let me Disabuse you have one point, though and that is this summer peak that used to be the case. So as you did your research it was probably old data.
Absolutely, Alabama is a winner Baker right now and whats fascinating about that is when you're a winner Peaker. Your reserve margin in the old days. When we were reliably a summer peak or you would have lots of warning about peak days in the summer you could see heat wave coming it was very elegant.
Modeling about how that persisted and grew over the space of say a week and you could really nail it and what we used to say what you needed 13.5% reserve margin in the current period and 15% for the next two years in order to meet your needs.
With winter, peaking becoming a reality, particularly in Alabama.
And with.
The the penetration of solar generation not being available during the time you need winter peaks right.
Right, that's seven am in the morning roughly.
You better have good storage, maybe that work maybe it doesnt.
And.
Now you need reserve margin they may be in the Thirtys okay.
Okay. So it's a much different kettle of fish as we plan the system.
Now right now what we see is.
One of the important issues I really want to flip this over to drew because drew as we bought southern company and as we bought a GL resources was the CEO of Hey, Joe resources, and really understands this conversion market very well good.
I think the statistics for us right now.
Is that heating load electric versus gas right now in the southeast is about 50 50.
And so I think the really interesting question is where does that go.
Drew yes, it's it is interesting and I do carry a bit of a bias because of my background and it does vary by climate for sure one nuance I'd say is that.
Winter heating with electricity is a little bit more difficult to manage I would say than probably in alternative fuel in that it's not that our demand is greater in sheer megawatts as we planned but the volatility around it can be quite large and so the peak requirements that you have to plan for for very high.
It's exacerbated by exactly what Tom described which is.
Solar availability is lowest when we meet the highest peak in the middle of January at six am on a Monday morning as people prepare for work.
The state, though has done a good job there has been very robust competition, particularly in Georgia between gas and electric and where it makes the most sense. It has migrated in that direction and so as Tom described about half of our.
Customers across the southeast utilize electricity is there as their heat source in the in our Illinois jurisdiction, it's much more difficult to even contemplate that electricity could be an alternative to natural gas because of its efficiency and because we really have to focus on reliability and affordability for that customer.
Summer based just as we do in the southeast and so.
You will see continued electrification, where it makes sense, but we have to be realistic about where those limits are for our for the particular customer that we serve yeah, absolutely not through.
Through knows the stuff thanks.
Yeah, No thats interesting I certainly appreciate in Illinois, it's not going to work but.
I would assume that the air source heat pumps are.
Competitive in.
Your southeast region.
In many and generally below the latitudes were Atlanta exist and so it's everything as you move down into the planes, it's kind of in that line.
It's kind of Macon across Thats, what they call the Nat line down there.
Okay and want to see them equally.
Bob.
Okay.
We do see okay. Okay. Thank you that was very helpful.
Thats it.
Thanks, Charles I appreciate it thanks for joining us.
Thank you.
And thank you. Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.
Hey, Hello, Paul I'll be glad to have you with it.
Good to hear.
So all you have left here is.
Wanted to follow up with you on power secure.
And just I think has been shaping the business over the years since you bought it Youve sold a few things and what have you but.
You guys mentioned you call out the cobot sort of a negative impact on it.
And I was just wondering how should we think about power secure.
I mean, I don't think it is a big earnings driver, but does it have been significant earnings streams that we should think about in the future and also.
Just the.
Look for you are you thinking maybe that.
More of it should be sold or just strategically.
How's it hasn't.
Figure in the future.
Yeah, we've actually put a bright.
Bright young guy in charge of kind of the confluence of southern power power secure and the part of Southern company gas it's called Cequent.
Now here's the here's the issue I think that that we've raised.
Co bid could have an impact, but it's because people are less likely to have people travel to their site to go get involved in the kind of things that.
Powersecure does for a living right. If you think about it in this iconic century old business model, we have of large scale central station, making moving and selling.
Selling energy.
You may recall, we bought power secure as an idea that would position us to be able to influence through technology and working with customers ranging customer requirements to essentially miniaturized that model and put it on the customer premises, so make move and sale.
Ill now at home depot store or at a defense installation and you can imagine everything in between.
We have and Paul you absolutely hit the nail on the head we have been putting it into our fashion. Since we bought it that is we got rid of a electric lighting business. We got rid of a utility services business, we're really focused on that intersection of.
Of independent power generation.
And kind of the equipment you would think about in the in the move and sell that would be proprietary switch gear at Microgrids I.
I know this statistic is dated but I'll quote it anyway, its probably what two years old that some magazine said that southern company and power secure.
Was responsible for something like 85% market share.
Micro grids in the United States. So when you hear about Microgrids, most likely that the US now I'll just bet those numbers have decreased over time more people are getting into that market, but we weren't we remain by far the dominant I think solution for customers that can integrate all the way through that make move and so.
Our value chain.
But it will get in there with control equipment until we get in there with distributed generation, but we are the integrator and in fact provider.
Of all of that solution.
The importance of Cequent is that.
Giving people control over fuel stocks I mean over over their electricity production at all is really important but they don't know how to procure fuel or be it natural gas or hydrogen or whatever it is the people its secret can.
And so getting their capability to the southern power generation centric and the power secure broader equipment Microgrid centric approach makes a lot of sense, Chris Kaminski and our system is charged with making all of that makes sense and that is it.
Excuse me just a.
Kind of arms length.
Little deal that we're trying to do in 50 states in the United States I think were virtually in every state in the United States doing that.
One of the other big deals as as power secures earnings are a virtual p. not compared to southern company earnings.
It isn't important that our host utilities learn what's happening on other people's beaches, you're more vulnerable to this approach.
That is miniaturizing make move and sell.
If you do do not have a strong cost profile or customer service or reliability.
Those areas of weakness for some companies are areas of strength for our offering now Fortunately in the south we do really well with price service and reliability it.
We always say about Powersecure is and really the union of those three efforts is.
It is a.
It is an authentically oriented defensive strategy, whose value realize in its option value that is once those markets get some oxygen and take off.
We will be poised to play hard and influence.
Thats our idea.
But in terms of our financial business does better.
Not that any significant drag or anything that we should be thinking you guys mentioned that there might be a goodwill impairment.
And even mentioned in the last couple of quarters.
Your Q and I was just.
It seems a little bit surprising in that it seemed like it was coded related which I think we sort of temporary and I'm a little surprised that it might have an impact on goodwill, but but I mean, just in general, though it sounds like.
That's a separate accounting sort of.
And accounting.
[music].
Thanks.
Yes, Paul I would tell you is kind of a I mean, it's a disclosure item I think it's kind of a minor point.
I think the real shareholder interest in Powersecure is as I described.
This this idea driving make move and sell for the future.
I will power grids are picking up so I mean, there's a lot of microgrids are picking up so so.
So it sounds like there could be opportunities.
And Paul I, just show that they just had its best quarter ever.
So listen when I say that don't get the we're going to increase our sale I mean, our EPS.
Forecasts on parity or Theyre just small.
But they are doing well.
Good to hear thanks, so much.
You bet. Thank you.
Thank you.
And that will conclude today's question and answer session Mr. Fanning ultimate team once again for your closing remarks.
Hey, thanks, everybody.
What a great quarter, such an exciting time is to have the progress at Bogo three and four.
And.
Just for everybody's benefit I ask Paul Bowers to join US He did join us on this call.
And I know Paul was CFO and knows so many of you on the call today I just want to give him the space to end the call.
Paul what would you like to say well thanks Tom.
Put contacts and the decision associated with retirement and I thought.
Major decision personally, but also you got to think about the context of how it impact the company and as Tom outlined in opening our confidence in delivering unit three owner before our regulatory data November there's one on the reflecting points for me to make my decision about retirement.
You think about the third quarter be in that period in which we think it will be commercial operation.
So when I'm contemplating timing for leadership change for Georgia power.
As Tom and I will discuss the transition theme, obviously associated with fuel loads because that's the signal in of itself that we.
We're about complete with unit three.
So with that and as we have disclosed the concurrent to offload and fuel and unit three.
We will make the leadership change at Georgia power with a great leader under Chris Womack to take the reins as we move forward, it's been a great privilege and honor to be part of this team and sort of in a lot of different capacities over the years, but as you think about southern company and you think about what we had before.
The momentum continues to grow and it's got great future in terms of what we can deliver for not only our customers, but all our shareholders and as Tom pointed out I'm getting old.
Okay.
Thanks, Doug Okay, Hey, Thanks, Paul you've been a champion through your whole career here, it's been a great friend and an awesome business leader for the South anyway, thanks to everybody on the call grow.
Great stuff, we'll talk to you soon.
Thank you, Sir ladies and gentlemen. This concludes just doesn't company. It is clear that 2020 earnings call. You may now disconnect. Thank you once again have a great gang.
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