Q1 2021 Southern Co Earnings Call
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Good afternoon. My name is D me try and I'll be your conference operator today at this time I would like to welcome everyone to the Southern company first quarter 2021 earnings call.
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After the Speakers' remarks, there will be a question and answer session.
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As a reminder, this conference is being recorded Thursday April 29th 2020 other ones.
When I look through the conference over to Scott Gammill Investor Relations Director. Please go ahead Sir.
Thank you Joe Good afternoon, and welcome to Southern Company's first quarter 2021 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 we'll be making forward looking statements. Today. In addition to providing historical information various important factors could cause actual results to differ materially from those indicated in the forward looking statements, including those discussed in our form 10-K form 10-Q and subsequent filings.
In addition, we will present non-GAAP financial information on this call reconciliations to the applicable GAAP measure are included in the financial information. We released this morning as well as the slides for this conference call, which are both available on our Investor Relations website at Investor that Southern company Dot Com.
At this time I'll turn the call over to Tom Fanning.
Well good afternoon, and thank you all for joining us as you can see from the materials. We released this morning, we reported a strong start to the year with adjusted earnings per share for the first quarter of 2021 ahead of our estimate.
The economies in our service territories are starting to recover from the COVID-19 pandemic.
Customer demand remains mildly lower than pre pandemic levels during the first quarter it exceeded our expectation.
Importantly, many of the programs, we implemented to keep customers connected during the pandemic have proven to be very effective we have reliably provided energy to our customers and facilitated alternative payment arrangements for those in need I continue to be proud of our employees and the way.
As we have partnered with our communities throughout this pandemic.
This past February parts of our nation, we're contending with the effects of devastating winter weather the cripple generating units in power grids in Texas and beyond.
At Southern company, each of our businesses, including those with our operations in Texas and the southwest region performed well during this event.
Our regulated electric and gas utilities did not experience any operational issues or related service disruptions.
Southern power was minimally impacted due to its highly contracted business model.
Our wholesale gas services subsidiary Sequent energy effectively served customers in need utilizing in large part natural gas held in storage.
And micro grids provided by power secure had a 98 run time reliability producing over 2260 megawatt hours of reliable energy for our customers during the storm.
The winter seasons, a typical temperatures have also caused utilities across the country to evaluate their own system resilience under similar conditions for southern company, our vertically integrated structure and integrated resource planning process as we utilize across our southeast electric utilities have.
Beneficial for years, and allowing us along with our regulators to carefully consider planned for and invest in infrastructure needed to address a range of extreme circumstances and improve resilience, we will continue to leverage the rigorous analysis.
And stakeholder input provided by these proceedings as we evaluate the potential for additional system enhancements across our footprint.
Let's turn now to an update on plant Vogtle units three and four <unk>.
Unit three hot functional testing started on April 25th Mark in the last milestone and a series of major tests.
Hot functional testing is conducted to verify the successful operation of reactor components and systems together and to confirm that the reactor is ready for fuel load.
As part of the testing the site team will run unit three plant systems without nuclear fuel and advanced through the testing process to reach normal operating pressure and temperature.
Starting hot functional testing represents a significant step towards the operation of unit, three and ultimately providing customers with a reliable carbon free energy source for the next 60 to 80 years.
This work plan now targets fuel load in the third quarter and late December 2021 in service day for unit three of course any delays could result in our first quarter 2022 unit three in service date.
Now as we have stated in prior calls an important step in our system turnover process is to assure that the as built state of the plant aligns with the design basis and to resolve any differences.
Before we close systems declare them ready for testing and submit I tax we are committed to the notion of getting it right.
In recent months southern nuclear identified certain construction remediation work, primarily electrical in nature that was necessary to ensure the quality and design standards were met prior to the start of hot functional testing.
We reviewed the project's construction quality programs prior to hot functional testing, we implemented improvement plans and we believe southern nuclear construction quality program is effective.
Furthermore, the improvement plans. We are implementing are designed to help drive successful completion of unit three and improved performance for unit four.
As the operator of these units we are committed to getting it right.
Striving to ensure our safety and quality standards are met prior to significant testing and operations activities, we will not sacrifice that commitment to meet schedule or milestone dates.
With unit three direct construction nearing completion and hot functional testing and progress. Our primary system focus include going forward. One successful completion of hot functional testing to completion of the remaining construction system turnovers.
And testing leading to fuel load and three an orderly transition from fuel load to an efficient startup of the unit.
The I tax the middle and review process is expected to accelerate as we move into and beyond the hot functional test sequence to date 188 items have been submitted to the NRC. We will submit the remaining 211 during hot functional testing as we.
We approach fuel load.
Turning to unit four direct construction is now approximately 80% complete and the current site work plan targets completion in the third quarter of 2022, which would provide margin to the regulatory approved November 22 in service date.
Earlier this week the site team placed the water tank on top of the unit four containment vessel and shield building roof, representing the last major crane lift at the project site.
Integrated flush is in progress and initial energy station is expected in the coming weeks.
The site is focused on increasing craft labor resources and electrical productivity.
We will continue adding incremental resources, while also shifting resources from unit three day unit, four which is expected to increase our current pace of construction completion.
Construction completion has averaged 1.5 per cent per month since the start of the year.
In order to achieve the November 22 regulatory approved in service dates we estimate we would need to average construction completion of approximately 2% per month through the end of this year.
And as a reference point.
Unit three averaged approximately 2% during the second half of 2019 and through the first half of 2020, which did include periods heavily impacted by COVID-19.
Looking now at cost during the first quarter, Georgia power allocated $84 million of contingency into the base capital forecast related to extending the schedule for unit three performing construction remediation work and increasing support resources across both.
Units.
As a result, Georgia power replenished its contingency by $48 million recording an after tax charge of $36 million at the end of the first quarter.
While there was contingency remaining prior to this increase we believe providing this additional amount of contingency as appropriate when considering the extended time necessary to reach the start of unit three hot functional testing and the potential cost risk remaining as we complete both use.
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The major risks that remain to our cost estimate are similar to those for schedule.
Namely one.
Our ability to increase earned hours and improved productivity or C. P. I at unit four.
Successful completion of the unit three hot functional testing and three completion of the system turnovers and subsequent testing related to the unit three fuel load.
You know, notably at this time last year, the onset of COVID-19 led to many uncertainties at the project site.
The site team has responded in an exemplary fashion, maintaining safety and progress toward completion of both units during what has been an unprecedented year.
With effective COVID-19 protocols in place and now the broader availability of vaccines the impact on the site has decreased in recent months as active cases and isolation rates are trending significantly lower.
We are very pleased that unit three hot functional testing is underway.
We've consistently said that both the commencement and success. That's what completion of this testing sequence will reduce risk for the project and as always I want to thank our employees contractors co owners and community partners for their unwavering dedication to this important project.
Drew I'll turn it over to you now for an update on the financials.
Thanks, Tom and good afternoon, everyone I hope, you're all safe and well as Tom mentioned, we had a very strong start to the year, our adjusted EPS for the first quarter of 'twenty 'twenty. One was 98 cents 20 cents higher than last year and 14 cents above our estimate.
The primary drivers compared to last year with strong performance at our state regulated utilities. Despite a comparative quarter that had very limited COVID-19 impacts the lessons we learned during COVID-19 allowed us to maintain a relatively static cost structure as we saw withdrawal of COVID-19 impacts from their peak.
We saw a year over year benefit of six cents from weather due to the extremely mild first quarter, we experienced in 2020.
Further retail electric revenues increased in the aggregate due to strong customer growth in the southeast and constructive state regulatory actions.
When looking at it and adjusted EPS as compared to our estimate for the quarter. The main drivers of the positive variance were continued expense discipline.
Retail sales impacts from COVID-19 that we're nearly 60% better than our forecast across all customer classes and significantly lower than their peak and residential customer growth that has continued to exceed our expectation by almost 50%. We added nearly 60000 customers last year.
A detailed reconciliation of our reported and adjusted quarterly results as compared to 2020 is included in today's release and the earnings package.
Looking more closely at sales in the first quarter weather normal retail sales were only approximately 1.5% lower than last year's largely unaffected quarter.
This decrease was driven by the continued trends of higher residential sales offset by lower commercial and industrial salt sales compared to normal times, while residential sales remained elevated commercial and industrial sales continue to be depressed by about 3%.
As you would expect the commercial sub sectors, most impacted by the pandemic continue to be office restaurant in education.
These are meaningful declines and we expect that recovery to be very gradual even with improving economic conditions.
For industrial sales during the quarter supply chain constraints appear to be affecting the automotive sector with primary metals and chemicals also down but construction in lumber in particular are demonstrating early strength in.
In general all industrial segments have moved stronger since the COVID-19 peak.
The economies in our service territory are showing strong signs of recovery with retail sales exceeding our expectations in the first quarter by roughly three percentage points.
A recent analysis produced by IHS market estimates that most southeastern states, including Georgia, Alabama, and Mississippi are predicted to return to their pre pandemic peak employment levels by 2022, while other states may not return to these levels until 2025 and beyond we have certainly learned that the COVID-19 pandemic and its impacts are unpredictable.
Richtel, but the potential for more near term recovery is encouraging.
We mentioned on our last call that economic development trends were strong in our region, particularly in Georgia and in fact in the first quarter of 2021 alone economic development announcements in southern company's retail Electric service territory included. The addition of over 3600, new jobs and investments of more than $2.2 billion.
We saw strong activity in both non manufacturing and manufacturing segments with new project announcements across a variety of industries, including warehousing distribution scientific and transportation equipment among others.
For the second quarter of 2021 our estimated EPS or adjusted EPS estimate is 78 cents I would also like to call your attention to our recent dividend increase at its last meeting the Southern company Board of directors approved an eight cent per share increase in our common dividend raising our annualized rate to $2 and sick.
64 cents per share.
This action marks our 20th consecutive annual increase and for 73 years dating back to 1948 Southern company has paid a dividend that was equal to or greater than that of the previous year. The board's decision to increase the dividend reinforces the strength and sustainability of southern company's business. This.
Dedication to continuing our dividend increases combined with our projected long term EPS growth growth rate of 5% to 7% supports our objective of providing superior risk adjusted total shareholder return to investors over the long term.
Before I turn the call back to Tom I'd like to spend a few minutes, providing an update on some of our strategic priorities on our ESG efforts recall in January Southern company became the first major U S utility to publish a sustainability financing sustainable financing framework. Our first issuance was a green bond <unk>.
Weighted to southern Power's renewable investments further solidifying southern power is one of the largest green bond issuers in the United States.
In February we issued our inaugural sustainable bond at Georgia power with net proceeds to be used for sustainable projects, such as our spending with diverse and small business suppliers and our investment in renewable energy projects.
The Georgia power issuance aligns with our ongoing commitment to the community and the continued growth of Georgia power solar portfolio.
We look forward to leveraging our sustainable.
Financing framework for future financings by all of our issuers as appropriate.
Also I'd mentioned that southern power has been very active over the last few years, establishing itself as one of the nation's largest renewable generation owners with a total renewable portfolio of nearly 5000 megawatts in operation or under construction.
Within the last month Southern power announced the acquisition of the 300 megawatt dual harvest wind facility located in South Dakota, and the hundred and 18 megawatt glass Sans wind facility located in Oklahoma with these acquisitions Southern power now owns 15 wind projects and approximately 2500 megawatts.
Of solar across the U S. Along with approximately 160 megawatts of battery storage the existing generating generation fleet comprised of both renewables and natural gas is over 90% contracted for the next 10 years.
Finally over the past three years, we have strategically simplified our business in order to focus our time and investments in our core operations as a number. Another example of that commitment yesterday, we entered into an agreement to sell our wholesale gas trading and services business comprised of Sequent energy management and secret.
Energy, Canada, and we expect to complete the transaction in the third quarter of 2021.
We do not expect a material gain or loss on the sales of the business, though it will provide a return of the associated working capital and the elimination of certain credits supports of approximately $1 billion.
As a reminder, we have always excluded sequence earnings from our adjusted results due to its quarterly variability. So the sale of this business both reduces risk and has no impact on our adjusted EPS expectations for the remainder of the year.
I'd like to personally thank the team at sequent for their years of dedication and service to the company I can tell you that it's been my pleasure working with all of those individuals that sequence for more than 20 years and I really look forward to their continued success.
Tom with that I'll turn it back over to you.
Thanks drew.
As I noted last quarter, we achieved a 50% reduction in G. H G emissions in 'twenty 'twenty, beating our 2030 goal by a decade.
Earlier this month, we filed an integrated resource plan in Mississippi that includes the retirement of Mississippi's last coal unit in 2027.
Both Alabama power and Georgia power will work with their respective regulators over the next year and responding to the effluent limitation guidelines rules, which they will reflect in their next integrated resource plans. We will also continue to work with all stakeholders in developing the strategies.
Another note.
We have historically worked in partnership with municipalities and co ops in our region, we work hard on mutual respect and constructive collaboration.
As an example of the wisdom of this approach, Alabama power recently signed a long term agreement with power South a valued customer in Alabama, which is expected to create energy savings and enhance system reliability from coordinated planning and operations as a part of this agreement al.
Bama power has the right to participate in a portion of power south future incremental load growth.
In closing.
Our strong first quarter positions us well to deliver on our financial objectives for the year with the summer months and storm season ahead, our operating companies are well prepared to support the needs of our customers and of course, all eyes will remain on progress at Vogel and we look forward to providing continued.
Dates as we approach fuel load and in service for unit three.
Thank you for joining us this afternoon.
Operator, we're now ready to take questions.
Thank you if you'd like to register a question. Please press the one followed by the four on your telephone you'll hear with be Tom prompt to acknowledge I request if you can.
Question has been answered and you would like to withdraw your registration. Please press the one followed by the three.
One moment please for the first question.
Our first question comes from the line of Julien Dumoulin Smith with Bank of America. Please proceed.
Julian.
Good afternoon, tea, hey, pleasure good to chat.
Absolutely. So if I can if we can chat here I mean, you pointed out several factors that contributed to the progress of the project right but.
But clearly productivity is the your focus area. It seems like from your prepared comments here can you talk about your plans there to turnaround productivity. It sounds like it's more so a unit for unit three.
But just altogether.
Where do we stand more specifically numerically on productivity, where does it go up and in what what do you think you can do to improve that specifically you bet, yeah, well look number one we're basically modeling forward experience on three for four so let's think about it do you remember last.
Year. It really started about the last six months of 19 through the first six months of 'twenty remember when we were staffing up.
Effectively that's what we're doing now on four.
We've delayed that and we've accounted for all of this and the revised estimate to complete and everything else because we didn't want to release all these people to to four until effectively we finished three so what we have done is just estimated that we can hit November with.
You know.
Experienced similar to last year will get C. P I up.
I don't know about 165 for the remainder of the project, we will be completing at least 2% now here's where I think we have room for improvement.
Remember the period I just told you the last six months of 19 first six months of 'twenty.
Included in that were three waves of COVID-19.
Who knows what's going to happen with COVID-19, but we have some reason for optimism given that.
We expanded vaccines. It appears that the waves have gotten smaller certainly our experience right now is way less than it has been and so our view is productivity should rise and so we have some level of optimism obviously, we can't guarantee it there.
Will at least meet or beat what we did on unit three with unit four.
One last thing.
There are always lessons learned on unit three and some of the quality measures. We just talked about going into hot functional test. We're applying all of those lessons per unit for so that we won't have to repeat them there.
In fact, our good friends from Bechtel came to our last board meeting and reiterated the notion that we should see better performance on four than three.
All we're saying is right now Julian that even if we did just what we did on unit three we can hit November we frankly believe and expect we will do better.
Got it, but we won't see that uptick in replacing.
We placing of personnel until after fuel load just said.
Right.
I would say so let's go through the big risk factors going forward on three.
I guess the predicate is you got to have a successful H F T right.
I think the biggest risk factor however, going forward as after H F T to fuel load. There's two segments of work left that we still have to do and do well.
One is.
Completing the work that really is related to nuclear fuel right H F. T means that we're going to use the effluent heat off the reactor coolant pumps to heat up.
Project.
So it would be things related to nuclear fuel like.
The systems required to remove the fuel from the fuel pool and move it over to the reactor core. It would include systems like finishing up the Rad waste facility.
Second segment would relate to a what I would call broadly support systems recall that we're going to have about 800 permanent employees at the site.
So support systems for those folks so let's think about H D. A C.
Communications.
Potable potable water.
Things like that.
That will support the people that are going to be working at the plant.
Just to give you one more frame of reference.
It's taken a lot to get to H F T something like the latest work we've been doing 60% of those systems are what we would call safety related and by that what you should hear complexity.
The.
Amount of work to be done in between H F. T completion and fuel load is significantly less maybe 60% of that work and only about 10% or less of those systems are safety related.
So I will say this to you.
I believe that that's the next riskiest thing we have to do.
But it's not as big a deal as it has been getting the H F T.
And then the third final thing is having a successful run from fuel load and surface, we feel pretty confident about that.
Hey last point, so I think.
Thank Julian the you were starting to see people move now frankly from unit three per unit for certainly that'll get accelerated into the summer.
Probably it'll start to Max out around June.
And then we'll hit our numbers at unit four.
Okay got it excellent. Thank you so much for the details right best of luck.
You bet. Thank you I appreciate you joining us.
Our next question comes from the line of Steve Fleishman with Wolfe Research. Please go ahead.
Hey, Steve how are you.
Hey, Tom and Andrew Good afternoon.
So just just first on the on board I guess, one question on Vogtle, just the quality issues that you quality control issues you identified.
On the I guess the release during March.
I assume you feel like those have been.
Remediated in.
Maybe just give some color on kind of what was done.
To make sure you're you're kind of on the right track there.
You bet.
So let's back up for several calls.
And I use this vernacular but I always caution you, it's just vernacular paper.
But effectively that involved assuring that there was in the evaluation of the as built site azbell condition of the plant as compared to the design basis of the plant that that was harmonized and where there were differences that we made adjustments some of that was work.
That needed to be Remediated, when we saw this starting to delay beyond what we thought recall.
That we were calling for a last two weeks in March kind of start of H F T.
We decided to really stop and take a good look at the system.
It appears that while there were some issues elsewhere in the plant the concentration of the issues really dealt with the electrical systems.
And then when you think about what it takes to turnover.
Our system.
Effectively when we saw these problems start to manifest themselves, we caught it ultimately with our quality control program and so in effect, we had that we sat back and looked at and said no. Our quality control program does work we have identified the systems we have remediated.
In order to start H F. T. There are some things that we did cash that will continue to be remediated from the finish of H F T to fuel load.
But we've sketched all of that out.
And.
We're pretty confident that you know everything that we know we're dealing with.
All of this is a part of our current cost and schedule estimates.
I would say to that.
And bechtold would agree with this we talked about this with our board.
That.
For what we have found we think we are making adjustments to unit four so that we will not we should not repeat these issues going forward that gives us more confidence in schedule and cost.
Great.
Different topic, just the sequent transaction and sale.
Did you name, who the buyer was and just can better understand so effectively.
Ah you're freeing up $1 billion of effective balance sheet through the sale, even if you if theres not a direct.
Payment is that how to think about it or.
Steve It is we have not announced the buyer because its something.
They will likely announced on their earnings call that will come in in future days.
It is somebody very credible and respected in this space and so we just think we've found a better owner for sequent than ourselves, we probably tie ups something on average like $200 million worth of working capital. So we have to provision for that within our credit facilities and then because of the <unk>.
Gross revenue or gross sales associated with that business and Ford positions, probably something like another $800 million worth of.
Parental support so.
These things will be freed up after some transition we don't expect the transaction to close until the beginning of the third quarter, but we will alert you as things progress.
Tom.
You know I always love to say value as a function of risk and return and when you look at it we've never included any earnings from Sequent.
In our return we've always extra amount as extraordinary items, they just too variable.
And it's fascinating I just have some quick data to show how variable. We are if you if you look at sequent.
Even prior to when southern made the acquisition say from 2010 forward.
They've averaged about $40 million and net income.
They had two years, one was $260 million and one was $163 million, where they really blew out earnings other than that the earnings were near zero. If you exclude those big years. So over nine years, they averaged about 4 million of net income.
And since we've owned sequent Theres been one big ear. The 163 in 2019 and then this year and then otherwise the earnings were around $23 million and net income and so if you step back and look at it number one we ex any earnings number two.
Because of the balance sheet, we are freeing up a $1 billion that reduces our risk profile. So net net to corporation value. We think this is a clear winner.
I think one more thing I just at a point out.
<unk> had a really good earnings year in the first quarter thankfully.
They had gas and storage, which supported the needs of the state of Texas, primarily you remember there were constrained gas flow sequent was able to step into the breach and sell a lot of gas in storage and made a lot of them are made some profits off of the volumes that they were able to provide thank god.
Net to Texas as customers that produced net income of around $200 million.
In recognition of our commitment to communities, we took $75 million or so of that 200 and put it into our foundation that is gonna get reply back into communities. So you'll see net income per sequent in the first quarter of around 133 or so.
So look.
We had a good year I do think that the the buyer is as drew said a better owner and you know I've said that for years a lot of M&A is all about who's the best owner of any particular asset and.
And I think for what we bought and what we've sold I think we've demonstrated our ability to bring value to shareholders every time.
Okay.
And then let.
Last question is.
Just on <unk>.
The renewables acquisitions in the wind.
I'm just curious kind of what returns are you seeing there because I recall there was a period of time, where you had been saying that returns didn't.
Really look good for these <unk>.
Transactions and then you've been ramping them up more recently, so I assume.
David as you started to see them improve again could you just give some color on that.
Yeah, we think it's really.
A tough business, we continue to believe that and Steve you know I've talked about that in the dimensions of.
Kind of.
The duration of the contracts the terms and conditions of the contracts.
And so it's just been harder there's a lot of deals out there are I would say that our share.
Of new deals has just been lower than historical because there's too much money chasing too many deals we keep the same thresholds in place and rather than comment on any specific deal.
In general what we look for is significant contract coverage. So in this case, 90% over 10 years, we look for those things and we generally get profit that are say roe's plus 150 over our regulated business that would be our our general.
<unk>, rather than commenting on particular deals, but the deals that we just mentioned that drew just mentioned fit that profile.
Yeah.
Great great. Thank you.
You bet.
Our next question comes from the line of Michael Weinstein with Credit Suisse. Please go ahead.
Hey, Michael how are you.
Alright good.
Youre doing go.
Yes, Sir.
Hey, just a follow up on that last discussion.
Could you comment on your commitment to a business like power secure.
Also providing services out there is that is that how is that different in sequent waves are you seeing more value there.
It's completely different.
So we've talked in fact about a venn diagram in the past the three circles of a venn diagram in this case would have been.
Southern power power secure and sequent now, let's think about that for a minute.
Sequent.
Now, let's start with with power secure power secure has really been focused on kind of.
Mostly the retail side of the business, particularly commercial and industrial customers.
Where resilience is particularly important.
And in keeping with this 100 year old model of Central station make move and sell Prague.
Projects at scale.
Power secure essentially represents the idea of miniature rising that.
Century old business model, and putting the make move and sell.
Our premise at the customer per.
Mrs.
So when you think about some of our major customers, who do value resilience.
Exceptional level, we can put a micro grid, we are by far the largest largest share of micro grids in the United States through power secure we can put distributed generation. There we can put proprietary switch gear and storage.
And so this has been a wonderful kind of window on the world.
Add to the Venn diagram, what we've seen lately.
At Southern power Southern power grew up selling to other utilities or other co ops or other munis and lately.
A great kind of a target zone for southern power has been companies.
Desiring Green attribute so general Mills General Motors Carnival cruise lines people like that that want to have renewables as part of their generation portfolio. So to speak the union of what we're seeing.
That at southern power in respect of that business that market.
With the market that is served primarily by power secure theres, great overlap and great mutual synergy.
Now we used to have sequent as part of that Venn diagram, where we would in fact take over fuel management for some of the distributed generation at all serviced by our customers. We feel we can do that ourselves now and selling sequence.
It doesn't impact to a significant degree our ability to serve that need of our customers and if we can't do it we'll find somebody that can.
So and look at that and one last thing I just want to leave you with look at the data over the past few earnings calls we've done.
Through Hurricanes.
Winter storm, Yuri and others sequent non power secure.
Is able to provide reliability in excess of 98% in general terms.
Across these very devastating storms. This idea does work I will say.
Power secure remains kind of a peanut to our earnings we don't talk about power secure in terms of being a contributor to earnings even though it is earning a little bit of money.
I think the bigger value, we see is an option to what may be happening in the future and that is <unk>.
Because of technology because of changing customer requirements. It gives us a window on the world.
That allows us not only to learn about this new market.
But also to influence how it emerges and to position our franchise businesses optimally.
I'd just add.
Can you describe it as window in the world, it's sort of antenna into what the needs of the customer base is it really looks like people are focused on an extra nine of reliability, but the assets can be used either to meet that reliability or it can be dispatched.
I think our Best example, most recently is that we'll do constructions at the Atlanta Airport true to produce the kind of reliability. That's required there but in terms of distributed generation I think it demonstrates that folks are not really all that interested in prime power, but more interested in the kinds of backup and assure you that you can't get out of the power secure.
And regarding the phrase I would use is distributed infrastructure, which includes beyond generation micro grid storage its switch gear et cetera.
I think it's you know, it's a small thing, but it really helps us.
Alright, it more of a future look keeping our finger on the pulse of where the technology is going.
That's right that's right, Yeah, hey them along those lines one more question on this subject and that's battery storage you have you're having.
Having the deck a couple of big battery storage projects stand alone.
I believe.
Is that something that you see more standalone battery projects like that getting built.
Maybe as much as.
As much as we're currently seeing you know a renewable projects.
Is that an up and comer is that something with higher returns than wind and solar.
Something that may replace I don't know about you.
<unk> be interesting to see whether the returns are higher I think it is an absolute requirement will build a couple of hundred megawatts of battery. If you include what's in the tranquility and Garland packages, but also what we'll be doing within the state of Georgia were building. The two facilities, we named as part of as complements to our existing.
Solar facilities in California, but storage itself is probably the single biggest complication with the transition to renewables over the next couple of decades, whether it is going to be lithium ion which is relatively short duration. If you think about how our system operates today or something.
More complex like compressed air energy or liquid are liquid metal.
Pumped hydro was probably another great example, we're going to have to find ways for.
Long duration storage to complement the kinds of assets that we're talking about on the renewable side and one of the nice arrangements that we have.
Within Alabama power with <unk>.
Power source.
Is that they actually operate today, a case facility that can deliver battery power for 26 hours. It's been operating for almost 20 years. These are great experiments and understandings for us are things for us to learn I do think that battery will be an increasing area.
Area of investment for US, we just have to figure out what technology is most pertinent for the circumstance and I'll just add.
Gosh, I think somebody's going to probably ask this later so I'll just do it now but.
When we think about Capex going forward, we think about transitioning the fleet going forward, it's very clear to us that storage in some form whether it's short duration intermediate seasonal.
That's going to become important to support the inter meet the intermittent profile of renewables you know gosh.
Gosh, I think to achieve net zero for us, we're going to need about a 50% penetration mostly of solar.
And so you know on that Cold Winter peak day, Youre going to get a whole lot more megawatts to be able to meet those needs. Some storage. Some C. Ts some see CS with Ccs you name. It. So a hydrogen is important in that regard.
So these are important project two that's helping us understand better how to meet the aspirations of this administration.
And just a little more land your app there.
So were supporters of the bipartisan policy center.
And I'm a member of the net zero business Alliance.
We've had a session already with some other Ceos Ceos from Tyson Foods Occidental Petroleum, United Airlines, Weyerhaeuser and Conocophillips, We're meeting again Tuesday, with Gina Mccarthy and so part of our whole premise here is engaging constructively with the administration.
With the concept of yes, and that is you know we're going to need to support we're going to need the administration in the boat with us to achieve that aspiration.
Assuming we have a supply chain availabilities, and we have labor available the big issue for us to hit these kinds of numbers is that over the next 15 years, we will triple the.
The amount of generation, we will put on the ground as compared to any other 15 year period in our corporate history. It is a big lift.
Assuming we get the support can we do it yeah I think so.
There are lots of policy choices, along the way that make this a very complex decision.
Okay. Thanks, a lot guys.
Thank you.
Okay.
Our next question comes from the line of Angie <unk> with Seaport Global. Please go ahead.
Hey, Angie great to have you with us.
Thank you. So I'm just wondering look I never heard about sequence before I'm going to be honest I never heard about pivotal either so.
We've never heard off cash.
Can either bring a lot of money.
Well the purchase.
The sale price or like Oh.
Relief from a balance sheet capacity.
Not really you know, we're working very hard to clean those things up and we you know.
We do have cats and dogs around the place but it.
Southern investments right Southern holdings, but we think we've divested of a number of assets over the last couple of years, but this is Andrew I think our focus is just reduce business complexity focus investment on the things that we think we're rewarded.
Around.
And this is just sort of evidence of it are there large pockets of these things not a lot but.
Delinquent probably is a little bit left field the less stuff that we've talked about the last that we talked about in the past had been legacy stuff from merit going way back there. We had they had a leasing business. They didn't have the tax appetite. So that came over with us we've been dealing with that.
Sacco has been a part of that we've talked about that in the past.
Bold all of the gas fired assets outside of our general service tier memory, but really just trying to focus focus on our core infrastructure birthright.
But the 200 million you mentioned that the business made in the first quarter that stays with you guys right. So I understand that that's right.
Adjustments, Okay, Cool and then Hey, Andrew.
Andrew Angie Angie when it 200 million, we put 75 of that in our in our charitable contract foundation to help communities. So it kind of netted out at 133 or so but that was a decision we made.
Okay.
Vocal and sorry for simplifying it.
But I always thought about hot functional testing at the end of the construction stage of Bogo three.
Now you know that's the past.
Pulse.
Scott functional seems to include a lot of construction.
So is it that you guys have delayed a portion of that construction that was still needed to be done before the fuel load in order to.
Scott Hot functional you know what I'm, saying, it's just again it feels the need that there is.
Still more construction to come even though I thought had functional the thought of it as the end of the construction cycle.
Yeah, you know.
We adjust we adjust the construction schedule all the time to optimize cost and schedule. We try to do that how can we do it every week to be honest with you.
In 2020, we did but this goes back to 2020.
We did make an adjustment to push some of the nuclear related construction like I mentioned, the Rad waste facility like I mentioned.
The equipment necessary to move the fuel from the storage pool over to the reactor.
That was moved past H F T.
The systems related to support the personnel at the site have kind of always been there I think.
That was the last move but that was kind of a year ago.
And like I say.
For the amount of construction left only I don't know its 10 per cent or less we got into an argument about what.
Complex and safety related but it's it's a smallish amount of that work that is in that vein left to do.
So.
It was nothing that was tactically decided in my view.
To do anything with H F. T. This was a decision we made back mostly in 2020.
Except that we make adjustments every week.
Okay. So just one follow up so is it fair to say that what's left to be done and I'm glad that that is probably somewhat depends on what the hot functional testing uncovers.
Is it fair to say at this point you think what's left to be done on the construction side of something.
Pretty straight forward so.
It shouldnt be prone to delays that we've seen in the past yes.
Yeah, I wish you know.
Andrew you've lived with us for a number of years here I mean, there's nothing that's easy every day I've described out there is a dogfight.
But it certainly is less complex and what we've been doing to get to H F T.
Okay. Thank you.
Thank you.
Our next question comes from the line of Jeremy Tonet with J P. Morgan. Please go ahead.
Hey, Jeremy.
Ryan on for Jeremy.
Hey, Ryan.
Just wanted to start kind of.
Some of what you're hearing at the federal level at the kind of the infrastructure plan and maybe just regarding nuclear and kind of general federal support you're seeing at the moment for kind of just a nuclear generation in general.
So this is an excellent question.
Here's my view.
And let me speak broadly the administration.
If they're going to hit their aspiration of <unk>.
<unk> 80 per cent removal by 2030, and 100% net zero by 2035, and then move the whole economy.
It's a net zero by 2050.
This is an important and awfully complex and difficult undertaking and we are ready to support them. However, we can.
And this is part of the conversations we've been having on an ongoing basis with this administration as I mentioned, we've talked with Gina Mccarthy before on a different level will be talk I'll be talking with her again next Tuesday, I think the administration gets it that there needs to be a whole different level of public private cooperation.
In collaboration carrots, and sticks in order to get this done I will say a talk in the book of nuclear that it's important for the United States to keep nuclear as a priority.
And so anything they can do to help to.
To keep the nuclear assets alive really helps the United States broadly with their long term goal.
And that not only includes.
Projects like ours.
The current nuclear assets in operation that are at risk because of an imperfect market design.
But also providing R&D support for the so called Gen. Four reactors that may appear in the 2030 timeframe.
All of this is an important part to achieving net zero for the economy by 2050.
And then maybe just one more kind of coming out of the federal level.
High level thoughts I mean, we've seen I think some companies early stages talking about carbon sequestration.
Some focus on maybe improving some of the tax credits on that side I don't know if there's anything that's on your radar or kind of how far away you see that technology at this point.
So let me just say this I think the wyden Bill that's kind of floating around right now.
It's pretty supportive to kind of a long term.
Objective.
So I would take a look at that piece of proposed legislation and see a see what it has that's a pretty good start there there could be lots of other things you know it's interesting I did some media. This morning and people are asking me.
Kind of specific ideas you know at this point Theres more ideas and there are solutions.
But we're going to need to work together carrots, and sticks and you know what at the end of the day. The objective function is not just carbon.
For the American economy, and it goes back to my work with the fed.
It is so important to the fabric of our economic health as a nation, we got to get this right and getting it right. We've got a balance the notions of clean safe reliable and affordable.
So all of these must work in balance to achieve a good result for this nation.
I appreciate it.
Thanks for taking my questions.
You bet. Thank you.
Our next question comes from the line of Andrew Weisel with Scotiabank. Please go ahead.
Thanks for joining us.
Hey, Thanks for having me.
I've got a quick one on the on the balance sheet. It looks like you've dropped the expected debt financing planned for the next three years by over $2 billion I imagine the bulk of that is the $1 billion of freed up working capital and parent credit support related to sequent does that also include cash proceeds from the sale and are there other noteworthy factors there.
Wait a minute.
I'll turn this over to drew the broad conclusion of your question is no.
None of this has anything to do with sequent at this point.
Andrew I would just say the reason it dropped is because we did the long term debt issuance of $2 billion sequent really only changes what we would provision for short term working capital so that would come out of bank revolvers and the like but I would say if you aggregate what we actually issued in the first half you'd come up with a number that's almost.
<unk> the same as what we had projected when we met with you last but we can we're happy to walk you through the table I think it's page 19 or something like that in the in the earnings packet.
Okay. My mistake I think I, just misread that table, then sorry about that Joe, but yes dollars from.
Sequent.
<unk> would be incremental or no.
No. So so we will the sale will occur at or around book value plus or minus that that's a relatively small number won't have major implications for cash generation will then be able to reduce revolvers.
Cuz, we're getting a return of working capital these numbers are.
The order of magnitude smaller than what Youre looking at on Slide 19. The other 800 million generally takes the form of parent guarantees or assurances for the underlying transactions that sequin has entered into those arent the nominated on the balance sheet there.
Sort of off balance sheet assurances from parent.
Yep Yep.
Okay understood. Thanks for explaining that than just want a quick one on COVID-19 are you able to provide some numbers around active cases of COVID-19 and absenteeism on the construction site. Tom I think you said theyre trending lower but are you able to quantify that and without getting into sensitive information do you have any sense of vaccination rates among workers.
On this site.
You know I don't on vaccination rates I know, they're they're up I saw report recently that.
Another 500 got vaccinate, David I do know that I can't tell you what percent of the work force is vaccinated.
That may violate HIPAA rules, and all sorts of things, but right now I mean I'll just tell you that the current report card only 20 people.
Our tested positive for COVID-19 on our site you know at other times, we've had hundreds in that vein.
The total positives sense.
The project has begun as 2500.
We've had.
Nearly 10000 people tested we only have 75 people in isolation right now in that number I think in one reporting period would have been 500 yep. So its way down.
But you always say the ebb and flow that yeah.
Yes. It is great to hear I, you know I, just don't know what's going to happen with these new variants and everything else. We we are hopeful that the worst is behind us.
Agreed fingers crossed alright, thank you.
Yep.
Our next question comes from the line of Michael Lapidus with that Goldman Sachs. Please go ahead.
Hey, guys, Hey, Michael how big it might.
Michael how about those yellow jackets man.
Basket.
Good day.
Glad to see the guy.
Super Nice Scott.
Yes he is.
Question for you.
It's been a while.
Previously I think disclosed what your potential coal ash remediation liabilities were at I think it's been a couple of years can you talk about what that number is in dollar billions and that timeline do you think you have to meet those requirements from the planes that are still operating.
And to be honest, how material are the coal ash and CCR rags.
Not to your coal fleet, but the entire region's coal fleet.
I'll turn this over to drew it's 10 billion over 10 years yeah.
And Michael I think you can probably find all of that we do a pretty decent detail of it in the 10-K every year and so you can take a look at how that that has modulate it as Tom said, it's about $10 billion over 10 years, if I think about what's in our five year plan, probably 30, maybe at most 40% of it is contained within that five.
Year period, and then the balance hangs out over the over the end of that.
But for for operating.
Yeah.
I'm just trying to get my arms around how important of a factor. This is in the retire not retire decision per existing plant per operating plants.
It's not important at all I don't think I mean, it I came out one annual meeting and said we were going to get we're going to retire all of our ash ponds and we did that before there was any legislation and all that other stuff. We we were really ahead of the game there.
I really think the more important issues going forward are things like the affluent limitation guideline is going to be a big deal. You know what is that we got to declare by around October so for sure.
We are working with our regulators and their staffs to get our arms around that issue because you kind of have to make a declaration and then as we said I think in the script that those conclusions would be a central part of our filings in Alabama and in Georgia with respect to the integration.
The integrated resource plan.
Only thing I'd also point you to maybe is that we will have to make filings against the E. L. G requirements. That's effluent limitation guidelines in October that will require us to specify for each facility that we operate whether we intend to make investment to continue its operation, whether we expect to close that facility or weather.
We'll make some investment to put that facility into a condition that will allow us to operate something like 10% of the year, but I would say that coal.
We're not producing generally wet ash in.
<unk> is not part of our investment are closing decisions on those facilities almost everything is based on economics and then the other constraint that we might face perhaps at the federal level and I'm going to reach back to other earnings calls when I remember I raised myself skepticism about our capex that we show.
I still think it's thin.
And we talked about transmission as a component of its thinness.
I believe that as you take all of these issues going forward when you start retiring coal plants.
The generation has to come from somewhere.
And when you think about renewables being so important we need to think about.
Re reevaluating our long term transmission plan in order to hit those kinds of objectives and it may be that retired coal plants could be prime areas to locate some of those resources and built by our host companies, but look this is going to evolve over the next I don't know 10 to 12 months, we'll have.
A lot more information for you later I do think the Mississippi signal is pretty important.
Alright. Thank you Tom Thank you chip.
Thank you.
Our next question comes from the line of Derek Astro problem with ever Solar Evercore ISI. Please go ahead.
Doug it's great to have you with us.
Hey, good afternoon, Tom Thanks for taking my question maybe.
Start with drew and my my local question for you come back to you just drew.
On the quarter.
Weather was looks like.
A bad guy versus normal I'm trying to reconcile sort of the 98 cents.
Two the 84 cents guide is that predominantly just better COVID-19 trends.
It is so if you think about what we experienced we were expecting kind of a sideways COVID-19 relative to what we experienced in fourth quarter and what we actually saw was something that was.
Really just about a one five per cent reduction in total retail sales.
If you think about where we were for the year last year, we were down in aggregate kind of 3% on average and almost seven 5% on peak <unk>.
And we're just projecting forward as we think about second quarter, assuming that we don't really see much improvement from where we are today, so a little bit of sideways until we get a better understanding of what's coming down the pike in terms of.
In terms of COVID-19, Andrew our COVID-19 estimates we are of the vintage of last October somewhere around there for budgeting purposes, and I think it stands we could reevaluate what.
What the effect may be going forward.
Got it Okay. I mean I guess this is just the first quarter and you share that.
Bound three quarters to go so you'll reevaluate guidance as we move along but clearly you had a very strong start and look like.
COVID-19 terms.
Totally better than expectations.
That's right and we always evaluate our guidance in October after we've gotten through the summer season. If you think about the major factors that influence outcome there whether it's always a dominant one that's difficult to predict COVID-19 for sure is difficult to predict we want to make sure that we're making the proper investments in making the right expenditures in <unk>.
Each of our states and so we've got a provision for that in the second quarter and then just know that.
In terms of total earnings we would be disappointed if we're not towards the top end of the range. This year, but certainly we have limitations as it relates to earned ROE vs and commitments back to customers and so those adjustments typically hit in the in the fourth quarter that tend to modulate earnings into a much tighter range with the primary goal being.
You know very little variability in what we report relative to expectation with respect to those modulating effect those would be above the top of the above the top right.
Understood very helpful guys, maybe just Tom on the for the next six to eight weeks as you were sort of doing this hot functional testing can you just maybe elaborate on that.
Specific risks and what really remediation actions could you take in responding to those risks.
You mean within the test.
Yes.
Sure.
So we're off to a good start with the test although it is so early.
But you know for whatever it is three or four days of getting started here.
It's gone well.
Recall, the 45 day test.
<unk> is essentially a 30 days of ramping up pressure and temperature and then 15 days of ramping down pressure and temperature don't get excited if were different than 45 days.
We actually did some work in advance of declaring in service, but I would assume that youre going to be 45 days. If it's 50 days, it's no big deal Okay.
But that's kind of the plan 45 days then we opened the hood up just like you'd bought a car drove it for a month now you're going to look at it and see did everything worked like it was supposed to.
So there are stages, along the way as you think about I don't have it with me right here, but there is a.
Detailed path of different checkpoints, along the way I think in fact, it's eminent we're gonna raised temperature to 175 degrees and when that might happen Tonight. It might happen Friday, I mean, but that's the first level and then every incremental rise they start checking systems I think the.
The real the real thing I'm looking for.
That goes to risk is really the integration of everything like for example, we have tested all of our RCP reactor coolant pumps.
We've tested them briefly all four of them running together now we're going to run together for some period of time.
Do all of the support systems work, so not only do we have primary power and the integration of the plant we have external backup sources that have to work. So this is.
No. The final crews if you will before fuel load that makes sure that the integration of all other pieces, we've checked so far.
Do work.
No.
The culmination of all of this is we're going to raise temperatures up to about.
560 degrees and we will create steam and we will send it to the turbine and we will spend the turbine. Okay. So this is kind of big stuff.
The only thing that will remain and then finish the construction on some of these support systems.
And then load fuel.
Very helpful. Thank you Tom I appreciate the time you bet you bet. Thank you thanks for joining us.
Our next question comes from the line of Paul Fremont with Mizuho. Please go ahead.
Hey, Paul how are you.
Doing great. Thanks, a lot.
And yes populations on the Mark on the startup hot functional.
I wanted to start off with maybe a follow up.
Andrew <unk> question, you talked about a change schedule I think June of last year I think you added 500000 construction hours.
Can you just tell us.
In Layman's terms, you know roughly how many days or weeks that 500000 hours represents.
So boy that kind of.
That's an interesting question because.
I guess, if you're talking about the history of unit three it feels like maybe two months, but obviously you got to think about when you're spending that when I say two months I'm looking over the whole period. There are some months, where there was a boatload of hours in right. Now for example, construction as Jeff.
About done I think going back to Andy's question.
I mean, there's a tiny bit of what I would call construction left following a H F T and as for the support systems and the little bit associated with nuclear fuel. So it depends kind of where you are but these all fit in.
Think about a distributed over the whole curve of construction so hard to say my best guess is two months.
Okay, well, we'll see.
And then.
Theres obviously.
Remediation work.
That is now going to be added.
To that so instead of 500000 hours.
What would the total amount of construction hours look like.
Including all of the remediation that you need to do.
After hot functional testing.
So is the question how many hours remain after hot functional tests to fuel load.
Correct is that your quest construction.
Construction hours.
Maybe a 200000 something like that we'll finish most of that in June.
Yeah.
Thanks.
The hours that were budgeted last year is is no longer the case it that it's not 500000 hours anymore.
That's already been accounted for as the way I would say it.
All of that right, but you may remember at one time.
Paul we were talking about gosh, I mean I can remember.
Back when we reset the schedule, we thought we might get fuel load by the end of the year.
And then you know the latest update we gave you all before the 8-K, those we thought H F. T. We began at the end of March the last two.
Weeks in March and then when we saw that we had to remediate. Some of these issues. We pushed into April that gave rise to the 8-K and now we are giving you new schedule new cost that account for H F T.
As of April 25.
We say that according to the schedule with 20 days of margin, but according to the schedule that would give you a very late December.
And service remember if it was March it was November if its April it must be December and April twenty-five gives you late December.
And as we said if theres any more delays it could push you into the first quarter, but.
I'm I'm I hope I'm answering your REIT question, because the 500000 hours has already been incorporated into schedule. That's been incorporated into cost it's already accounted for them.
With 200000 hours left between.
Kind of now in the beginning of fuel load.
I hope I'm hitting the right answer I hope I'm, hitting what you're asking.
Okay and then.
It looks like you have.
You've got about 53 turnovers remaining out of 159.
Is that is that a fair characterization.
And then it also looks like you've averaged about 10 and a half turnovers per month from October through April.
Is that fair.
I wouldn't use that logic turnovers are all determined by when systems clear to major tests.
So.
We have about 50 left but I wouldn't think about them as Oh will you do X per month that they really are determined by you know here the presence of H F. T. We had to pass a lot of systems to get the H F. T. We have 50 more to go.
Less than 10% of those are what I would call safety related. The rest are you know support et cetera. As I've described so don't think about it on per month think about it on tied to systems and what remains.
And and we feel that we can do this before fuel load I mean, we've given you the schedule. If you try to I'm afraid I'm afraid from your question, if you're trying to say Oh, well, you've done four and a half per month and you've got 50 left that says and other 10 months, that's not the right logic.
If that was your question.
It's not a ratable analysis.
Okay.
So.
So.
I think what you're saying is you've got.
An estimated 200000 construction hours from the time, you come out of hot functional testing until.
<unk> does that is it.
Is that reasonable in terms of.
Yes of a conclusion.
Okay.
One.
One way to think about this is that we expected a certain reduction in intensity between hot functional test and fuel load and we'll just have to maintain intensity for a little bit longer to make sure. We meet meet fuel load on a timely basis, Hey, Paul one more piece of logic that we get these reports all the time and our big meetings.
Remember.
Remember I've described these meetings, where our process are effectively completely transparent in other words system independent monitor isn't there represents on the Georgia Public Service Commission staff Cove owners and our C. D O a everybody's in there. Okay. We do an evaluation. There's this gigantic long chart that maps out.
All of the systems that need to be complete over time.
One other things I, probably haven't said is clearly to you is I will now.
When you think about the remaining systems between say.
Hot functional and fuel load every one of those remaining 50 systems are over 90% complete so it's not like we're starting from ground zero. So you really finishing up.
What is effectively almost complete construction.
Maybe that is all my life.
Yeah, No actually it is and then my last question is.
I guess when you did a root cause analysis on the on the need for remediation you concluded that a motivation.
Credit construction hours as earned drove supervisors to turnover work to southern nuclear for testing without first correcting deficiencies in the work.
Is it possible that the level of earned hours and would also have been inflated by the fact that they were turning over work before it was actually adequately attack.
Sure.
Yeah, there may have been true I mean, it's possible, but that's all.
You know a little bit of day, and adding the dead in other words.
We are where we are right now and I think that probably did cause.
The recognition of what was effectively complete as opposed to work that remain that needed to be remediated was not as clear as it could have been.
So what we're giving you right now is a completely transparent view as to where we are and what needs to be done in order to complete I think that analysis was kind of backward looking.
And then maybe the lack of it.
Uh huh.
Oh I'm sorry go ahead.
No. The only thing I would just say they should reappear in unit four because we've taken into account those issues.
And then I think on.
The third quarter call you had talked about 45 days I think for art.
That functional and then another 55 days between the end of.
Hot functional and fuel load is that still.
The schedule that.
That we should be thinking about.
Yeah, we've added about I dunno, nearly two weeks into that schedule you remember Paul from.
Prior calls we had gosh I want to say a little over a month.
In the startup from fuel load to in service and we took.
We said, there's some time ago, we took about two weeks and added it into the.
Hot functional test too.
Fuel load. So you should think now that total period is kind of.
Well I don't know.
70 days.
Okay.
We just added contingency in there we added more margin.
And we did that at the same time to I think this was Angie.
We did that at the same time that we pushed some work that was around 2020, I want to say somewhere around there where we pushed some work beyond H F T N to fuel load.
And also some last quarter.
Okay.
Great. Thank you very much.
Hey, and thank you for raising all of these questions are all very important so Paul we sure appreciate your clarification here.
Our next question comes from the line of Andrew Levy with Hite hedge. Please go ahead.
Andrew how are you doing.
Alright, it could do this day everybody.
Towers, but.
What do you mean this stuff is correct.
[laughter] My brain Earth from the last one from London.
Question from before.
But.
This is off nuclear.
No.
I just kind of have a.
A thought about you guys in about where the industry is going.
And you know Tom you and I go way back as far as the industry and back in the Ninety's when deregulation.
We're starting.
Caused by very very high electric rates.
And there was something called the Super Southeast.
Stocks traded at a premium and then you've got companies like Kentucky utilities.
Other companies with low rates that traded at a premium.
So fast forward to now.
And fast forward to what the buyer the administration is proposing and where the industry is headed.
High rates in the northeast, mainly T&D companies that really don't have any levers.
To reduce their rates or to keep rates flat.
When I look at like Southern company again, we've got to get through just nuclear plant.
But once that is done can you maybe talk about.
And you had at a very high level.
<unk> to transform your fleet, obviously, you've talked about that but maybe the cost savings.
Around that.
Opportunity.
What will what will happen to your electric rates longer term relative to other parts of the country.
And also you know basically you know what that will do longer term again I'm thinking longer term.
What are your growth opportunities.
And it's a it's a very interesting question, but here's the thing.
Tom.
I think the wisdom of the integrated regulated model will bear fruit significantly as we consider some of these issues you know in the so called organized markets. There is very little control as to constructing an optimal portfolio number one number two.
When you think about the portfolio, we should consider that it includes transmission number three I think the fact that part of the secret sauce here is reconfiguring the portfolio absent Cole cole carries with it a whole lot of O&M.
And so not only is there optionality in terms of the generation and transmission. We will provide I think by our planning processes. We can do that in a way that's much more orderly and effective and efficient.
Then the organized markets and then finally, when you consider the O&M that could be freed up.
By closing down some of these O&M intensive facilities like coal plants, we have the ability to use that O&M to keep rates lower than you'll find elsewhere in the country.
Certainly even compared to those companies that are just wires only.
Their ability to deliver.
The kind of price.
Shock absorbers.
It doesn't exist because they will be takers of cost from the market.
So I can assure you that we've already been <unk>.
Talking about these issues with our regulators with our stockholders I mean, our stakeholders and I can think that we.
As my earnings call, but I think we're better positioned in this kind of model in this region than elsewhere in the United States.
Great. Thank you very much.
You bet. Thank you.
And that will conclude today's question and answer session. Sir are there any closing remarks.
Yeah, I just wanted to maybe end with Andy's comment. There. This is a very exciting time for us all we're making great progress on bogo.
I think we resolve the.
Delays and we think we have a clear path every month that goes by we reduce remaining risk in the project.
And so.
I think we continue to progress this thing and boy I can tell you the site for all the work. They are putting in is really starting to see the dividends of all their efforts and so I can tell you. We can see the light at the end of the tunnel.
And we are imbued with enthusiasm when I think about the days ahead in terms of transitioning the fleet Southern company is committed to constructive collaboration not just cooperation collaboration with the United States government to achieve their aspirations and so we.
We'll work together I love our cards in this regard I know a lot of people give you a lot of rhetoric about where they say they are and what they have done.
I would rather have our cards than almost anybody else's going forward as we address the future.
Thanks, everybody for your attendance today, I know went along but I always enjoy interactions and I know I always get a lot out of the questions you ask.
Thanks, again have a great next quarter and we'll see you again in July.
Thank you, Sir ladies and gentlemen, this concludes the southern company first quarter 2021 earnings call you may now disconnect.
Okay.
Uh huh.
Okay.
Yeah.
[music].
Okay.
Yes.
Okay.
Uh huh.