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Southern Co  (NYSE:SO)
Q3 2018 Earnings Conference Call
Nov. 07, 2018, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. My name is Bridget and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company Third Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Please note as well, ladies and gentlemen, that today's conference is being recorded, Wednesday, November 7, 2018.

I would now like to turn the call over to Mr. Scott Gammill, Investor Relations Director. Please go ahead, sir.

Scott Gammill -- Investor Relations Director

Thank you, Bridget. Good morning, and welcome to Southern Company's third quarter 2018 earnings call. Joining me this morning are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Drew Evans, Chief Financial Officer.

Let me remind you, we 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 the Form 10-K, third quarter Form 10-Q, and subsequent filings.

In addition, we will present non-GAAP financial information on this call. Reconciliations to applicable GAAP measures are included in the financial information we released this morning as well as our slides for this conference call. The slides we will discuss today will be viewed on the Investor Relations website at investor.southerncompany.com.

At this time, I'll turn the call over to Tom Fanning.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Good morning, and thank you for joining us today. As you can see from the materials we released this morning, we had a solid quarter. Our premier state-regulated electric and gas utilities, as well as our competitive generation subsidiary, Southern Power, continue to perform well and we remain on track to deliver adjusted results that are well above our original expectations.

While our financial performance this year is notable, we are particularly proud of how our employees performed before, during, and after the recent severe weather events. The resolve and professionalism of our employees has never been more evident than as demonstrated through recent restoration efforts in Alabama, Florida, and Georgia, following Hurricane Michael. Hurricane Michael was the strongest hurricane ever to come ashore in Northwest Florida, packing maximum sustained winds of 155 miles per hour and a powerful 14-foot storm surge that left devastation across the Panhandle of Florida. The destruction continued inland as Michael maintained Category 3 strength as it moved into Georgia and Alabama, another first-time event.

Immediately, following the storm, more than 600,000 customers were without power across our service territory. Storm restoration to customers of Alabama Power and Georgia Power was accomplished within three days of the storm. For Gulf Power, the effort included similar results for the service area which could be restored. However, much of their system around the Panama City area had to be entirely rebuilt. This rebuild effort was accomplished within 13 days, some 30 hours ahead of the estimated time to complete. This extraordinary effort was not only a testament of the hard work and dedication of over 12,000 Southern Company personnel but also included the critical contributions of over 35,000 personnel from 27 states in Canada who assisted with the restoration efforts. We owe these hardworking men and women a debt of gratitude for their commitment and personal sacrifice. The successful collaboration of our public and private partnership with the Department of Homeland Security and Department of Energy resulted in what we would consider an historic textbook restoration effort.

Before I turn the call over to Drew for a review of our financial results, I'd like to first provide a few key updates. First, an update on Plant Vogtle Units 3 and 4. On August 21, the Georgia Public Service Commission voted unanimously to approve Georgia Power's VCM 18 filing for Vogtle Units 3 and 4. Subsequent to that approval, Georgia Power filed its 19th VCM report, beginning a review process which is expected to conclude in February of 2019. A full schedule for the VCM 19 proceedings is included in the appendix of the slide deck for this call. Additionally, on September 26, all four Vogtle project co-owners voted to continue construction on Units 3 and 4. This commitment means that we will continue forward with the construction of the project which is critical to Georgia's and our nation's energy future. While there have been and will be challenges, we remain committed to safely completing both units and maintaining constructive relationships with our partners along the way.

Let's now move on to the progress at the site. The revised total project capital cost forecast including contingency communicated in the second quarter earnings call remains unchanged, including no assignment of the contingency estimate. We have continued to firm up subcontract costs and now have executed contracts for approximately 95% of estimated subcontract costs compared to approximately two-thirds as of our last earnings call. Recall that the approved in-service dates for Units 3 and 4 are November 2021 and November 2022, respectively. However, we continue to manage the site's planned work based on an accelerated completion dates of April 2021 and April 2022 for Units 3 and 4, respectively, to preserve schedule margin.

While some weekly results were impacted by Hurricane Florence and Michael, we have otherwise seen sustained improvement in productivity since the site's standdown and reset in late July. Since Bechtel became the primary construction contractor in October 2017, the cumulative Schedule Performance Index and Cost Performance Index are currently at 1.02 and 1.17, respectively. More recent weekly performance at the site resulted in SPI in line with historical performance and a significant improvement in CPI compared to long-term averages. We continue to view these two measures as the best indicators of performance at the site as they consider the collective impact of productivity of the craft labor and staffing levels.

Productivity is a key element of the project performance and that it ultimately determines the number of resources that we will need to successfully complete the project. Focus at the site on key schedule drivers, including the ramp up of craft labor, productivity, system turnover, and continuing to build upon the workable backlog to ensure maximum productivity. Most productivity improvements including weekly earned hours above 110,000 have come from the existing workforce. In fact, last week, we achieved 120,000 earned hours, a new site record. This compares to approximately 80,000 weekly earned hours prior to the site standdown and reset this past July.

We are continuing efforts to ramp up staffing levels to meet the earned hours planned in the accelerated schedule. Our objective is to achieve and maintain those levels from Spring 2019 through Spring of 2020 as we approach Unit 3 hot functional testing. We have several craft labor recruitment efforts under way, both domestically and internationally, and we are having success with the helping hands program, utilizing other trades to augment the electrician workforce on-site. Overall, the project is approximately 71% complete, including 58% of construction. We've included a list of future milestones in our slide deck. Since our last earnings call, all of our major milestones have been accomplished in support of our accelerated schedule on-site.

Meanwhile, the Sanmen 1 and Haiyang 1 Units in China have both achieved commercial operation. Sanmen 2 and Haiyang 2 are currently synced to the grid with commercial operation expected by year-end. It is important to note that the start-up process for the four units in China has gone and continues to go exceedingly well. Lessons learned from China will continue to benefit our project.

Next, as an update to our ongoing initiatives to optimize sources of common equity, we have reached a definitive agreement to sell Southern Power's Mankato Energy Center to Northern States Power. Recall that the Mankato facility consists of an existing one on one natural gas combined cycle with an expansion project that is currently in the late stages of construction and is expected to be in service by mid 2019. We expanded two-on-one facility will have a total capacity of approximately 760 megawatts. Subject to customary closing conditions, we expect this transaction to close in mid 2019, be earnings accretive and offset approximately $400 million of equity needs for Southern Company. The total transaction value is $650 million.

I'll now turn the call over to Drew for a financial and economic overview and an update on our existing initiatives.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Thanks, Tom, and good morning, everyone. The Mankato transaction Tom mentioned is another great example of our ability to efficiently source capital to mitigate our broader equity needs. We are also pleased to announce consistent with previous investor communications that we have executed the third-party tax equity financing arrangement for substantially all of Southern Power's existing wind portfolio. This transaction, which we expect to close before year-end 2018 provides $1.2 billion of total proceeds while retaining our important ownership position in a premium carbon-free wind portfolio. The transaction is expected to be EPS accretive and would offset approximately $1 billion of equity needs for Southern Company.

We also continue to work through the regulatory approval process at Burke for the sale of Gulf Power and Southern Power's Plant Stanton and Oleander. While Gulf Power's most recent priority has been the restoration efforts in the wake of Hurricane Michael, we currently expect to close both transactions during the first quarter of 2019. As a reminder, our initial forecast of post tax reform equity needs for 2018 through 2022 was approximately $7 billion. We have successfully reduced our projected equity need for this period by more than $4 billion through our proactive efforts to optimize equity sources. Additionally, we have already issued approximately $1 billion of equity through our internal and at-the-market programs through October of this year. Net of the incremental equity for Vogtle that we announced last quarter, our projected remaining equity needs from now through the end of 2022 are only $2.4 billion. We will continue to be thoughtful and strategic as we fulfill these needs.

Now for an update on third quarter earnings results. As you can see from the materials we released this morning, we've reported earnings for the third quarter of 2018 of $1.14 per share compared with earnings of $1.07 per share for the third quarter of 2017. For the nine months ended September 30, 2018, we reported earnings of $1.92 per share compared with earnings of $0.35 a share for the same period in 2017. Excluding the charges associated with construction projects, wholesale services earnings and other items described in our earnings call material, earnings for the third quarter of 2018 and the nine month period ending September 2018, were $1.14 and $2.83 per share, respectively. These results compare with adjusted earnings of $1.12 and $2.51 per share for the same periods in 2017. We note the excluded items in our earnings call materials, which include acquisition, disposition, and integration impacts as well.

Major earnings drivers to our adjusted results for the third quarter and year-to-date 2018 include the positive effects of constructive regulatory outcomes and weather at our state-regulated utilities, somewhat offset by increased depreciation and amortization and interest expense. We have also been successful in holding our O&M expense flat year-over-year at our state-regulated utilities, as we continue to work each day to operate more efficiently.

Our generation system load was 4% higher in the third quarter of 2018 compared to the third quarter of 2017, primarily due to warmer than normal temperatures in September and despite the impacts of Hurricane Irma -- or including the impacts of Hurricane Irma in September of 2017. The third quarter of 2018 also represented a record high for gas generation and the lowest level of coal generation in more than 15 years. Year-to-date 2018 gas generation represented 48% of the generating mix, with a high of 52% in September of 2018. This represents the highest monthly level of natural gas generation in our history. At recent gas price levels, our natural gas units are displacing virtually all of our coal units in the dispatch curve.

Moving now to the economic review of the third quarter. The Southeast economy continues to expand at an attractive pace. Our combined business territory continues to see slightly faster population growth in the nation, boosted by a net in-migration, particularly in Georgia. Job growth in Southern Company's electric business territory of 1.8% is also outpacing the national average. The key driver of our sales growth in this quarter is our strong residential customer growth for both electric and gas at a rate of 1% with Georgia leading the way.

Manufacturing activity in the Southeast electric footprint remains solid and most of our large industrial customers continue to report increases in new orders and production. Absent maintenance related outages at some pulp and paper production manufacturing which utilizes on-site co-generation, we saw positive trends and momentum in industrial consumption broadly across the top 10 industrial categories that we follow, which includes segments like chemicals and primary metals. The economic development pipeline in Southern Company's business territory remains robust despite a modest decline in the total number of active projects. So far, this year, we've seen a decline in the number of jobs announced, down 8% versus this time last year, but a very solid increase in business investment, which is up 29% compared with last year and in line with national trends.

Before I turn the call back over to Tom, I want to provide our outlook for the remainder of 2018. We estimate that Southern Company will earn $0.23 per share in the fourth quarter, which would result in full year performance at the very top of our revised adjusted EPS guidance range. Remember, we increased our guidance on the second quarter call to $2.95 to $3.05 per share. Our original adjusted EPS guidance range for 2018 was $2.80 to $2.95 per share. Our current year-end guidance implies an adjusted result that is 6% above the midpoint of our original guidance range, driven primarily by cost control, weather, and constructive regulatory outcomes in our state-regulated businesses. Our projected long-term EPS growth trajectory of 4% to 6% remains unchanged. This growth trajectory is based off the midpoint of our original 2018 guidance range of $2.87 per share.

Tom, I'll now turn the call back over to you for some closing remarks.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Thanks, Drew. As you can see from today's results, we continue to execute across our businesses, and we are well positioned to deliver on our goals for 2018 and beyond. We demonstrated the constructive nature of our state regulatory environments earlier this year as we delivered significant benefits to customers resulting from tax reform, while at the same time maintaining the credit metrics of our state-regulated businesses. For the incremental equity required to meet these plans, we executed in an outstanding manner through earnings accretive asset sales.

Additionally, the economy within our service territories remain strong with in-migrations and employment driving customer growth. As always, it is our customer-focused business model with emphasis on outstanding reliability, best-in-class customer service, and rates well below the national average that remains the cornerstone of our company and a key driver of long-term value to Southern Company's shareholders. Our commitment to delivering energy and energy solutions to customers includes conserving and protecting the environment for today and for future generations. This progress is evidenced by our successful reduction of greenhouse gas emissions by over 35% since 2007.

We understand the importance of engaging with all of our stakeholders in a productive, transparent conversation about how we safely manage risk, while delivering shareholder value and growth. Our goal of low to no carbon future will continue to inform our planning processes in the near future. We also continue to seek ways to improve our interim benchmarks as we progress toward our objective of a low to no carbon future. Southern Power also continues to execute on its plan to deploy capital into value-accretive carbon-free renewable projects. The 150 megawatt Cactus Flats wind facility in Texas reached commercial operation in July of 2018. The output from this facility is fully contracted through long-term purchase power agreements with General Mills and General Motors. Additionally, Southern Power recently announced the 200 megawatt Redding wind facility in Kansas with a 12-year power purchase agreement with Royal Caribbean cruise lines.

Let's now move on to the mid-term elections. We watched last night's election results with much interest. No matter who's in office we share a strong sense of purpose to our shared constituents all over the United States by providing clean, safe, reliable, and affordable energy to the customers we are privy (ph) to serve, we provide an unassailable advantage in a globally competitive worldwide economy. We remain focused on demonstrating superior performance across all our businesses. As we look ahead to our fourth quarter call in February, in addition to sharing our 2019 annual EPS guidance and an update on Vogtle 3 and 4, we will also update our five-year capital forecast, including expected ash pond closure costs and capital initiatives at our state-regulated utilities to improve service and lower operating costs.

We certainly appreciate your continued interest in Southern Company and are now ready to take your questions. Operator, we'll now take the first question.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from the line of Greg Gordon. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Greg.

Greg Gordon -- Evercore ISI -- Analyst

Hey, good morning, how are you?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Super.

Greg Gordon -- Evercore ISI -- Analyst

So, is it right that Chuck Eaton and Tricia Pridemore won the election last night? I'm looking online and it says they were ahead, but I didn't see that there were any firm figures in yet?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, there are still some ballots to be counted. In order to avoid a runoff, they got to be above 50%. Right now I believe Tricia Pridemore is above 50%. Chuck Eaton, I think the latest tally has a very slightly below 50%, but still with absentee ballots uncounted. We'll just have to see how that turns out. If there is a run-off, it would be, I think, December 4.

Greg Gordon -- Evercore ISI -- Analyst

Thank you. My second question is on a completely different subject on Vogtle. Based on the current construction schedule, when does the at-construction spending and intensity of labor demand at the site actually peak in terms of time horizon and you start to see declining spending and declining levels of employment at the site? Like, when are we at peak construction?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, I want to say we're adding about 100 people per month through, what, February.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Right.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And then it lasts about a year. There's kind of a big plateau up there and then it will ramp down starting in February of 2020.

Greg Gordon -- Evercore ISI -- Analyst

Perfect. Don't have any questions on the quarter, solid numbers. Thank you very much.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Thank you, my friend.

Operator

Our next question comes from the line of Jonathan Arnold of Deutsche Bank. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hey, Jonathan, good morning.

Jonathan Arnold -- Deutsche Bank -- Analyst

Good morning, guys. Just picking up on what you just said to Greg and looking back at what you had said last quarter, I think you said your schedule was to hit peak labor in November. So are you now sort of -- is that target now little more like spring of next year, and if that is a shift, can you just explain how that sort of fits within the broader Vogtle schedule discussion?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah. Number of factors at play. And one of the first things you should recognize is that kind of the optimal staffing curve is always a little bit of a moving target. Witness the productivity increase that we got on-site moving from kind of pre-standdown 80,000 hours a week, we've actually achieved 120,000 hours achieved the last week with actually fewer personnel. So we're able to manage kind of how much increased staffing we will need by what our productivity assumption maybe. Further, there is a whole host of other things at play. I think we've mentioned this helping hands idea.

A lot of what's going on right now involves kind of setting up cable trays and pulling cable on-site. Ultimately, you have to connect that cable. One of the things we thought about is the original projections assume that electricians would handle most of that work. Through the helping hands initiative, we can resegregate, resegment the work, so that other craft labor can participate in that activity. That obviously has an impact on how many electricians you will need. Ultimately, we do need more electricians on-site and we have aggressive plans in place. We continue to work with Department of Labor. We continue to think about different ways to reduce absenteeism and attract new labor from around the region.

Jonathan Arnold -- Deutsche Bank -- Analyst

Can you give some specifics on how many new people you need versus what you've done so far, just some numbers around that?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Sure. I think since -- if I remember this right, we had probably May through June 4,100 direct craft. Post the reset, we actually reduced the number of craft on-site. That went down to about 3,700 right and we've been adding some people now here lately. I think last week we added 40 people. Right now we have 3,850 on-site and what we would like to do by February to March is have somewhere in the 4,500 region. So if you add 100 per staff, that gets you to that kind of number.

Jonathan Arnold -- Deutsche Bank -- Analyst

So you need around 650 up from where you are today as the rough number?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Sure. Yes. And like I said, there is going to be a little bit of a moving target there, but that's right.

Jonathan Arnold -- Deutsche Bank -- Analyst

Okay. Just from memory that's probably a similar deficit to what you were talking about last quarter, so is (multiple speakers)

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

I would say it's a wee bit less. But, yeah, it's similar. Yeah, I wouldn't quibble about that.

Jonathan Arnold -- Deutsche Bank -- Analyst

Just one final thing. There was a number earlier in the year. I think it may have been the Independent Monitor's number that you needed to -- at some point you need to get to 140,000 hours a week and it's obviously good to see you getting within short of that. But is that a number that was -- is that your number or was that more staff number and --

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, you got the right number.

Jonathan Arnold -- Deutsche Bank -- Analyst

You've got the right target?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, you got a great memory. So let's just kind of go through the numbers. So if we it 120,000 kind of a duration, we believe we'll be able to satisfy the schedule at November. Of course we will use up a lot of our scheduled contingency, essentially getting above 120,000 to 140,000 or if we could do it even better than 140,000 to 150,000 or even 160,000. What that does is, increase our schedule margin, and that's something we're pursuing with great haste. But those numbers you are remembering our correct.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Yeah, just to emphasize that the 140,000 was related to the accelerated schedule which would put us in service and preserve margin but that's the April timeframe as opposed to the November commitments that we've made, statewide.

Jonathan Arnold -- Deutsche Bank -- Analyst

From what I'm hearing that's probably the type of number we should focus on perhaps more than the headcount, for example.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yes, that's exactly right. So, here's the thing. We are very gratified with the improvement in productivity that allowed us with fewer people to increase our hours up to 120. I must say and we push our people around a lot in our meetings, it's I think the ability with that level of staffing to get more productivity starts to get a little limited. Our key to success in getting more margin now will be getting more people. You're right to focus on the numbers of hours, because that's ultimately what matters, getting work done on the site. We do think we need more people on-site now.

Andrew Evans -- Chief Financial Officer, Executive Vice President

More people, but in an absolute terms, I don't know that we include that as part of our three cornered hat. We do still believe that CPI and SPI which measure the productivity and the cost of that labor, the cost of that labor being produced probably are better measures for us in aggregate.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

That's right, because all that matters is hours worked.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Right.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

I'm just saying at least productivity levels. At these productivity levels, we need more people.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Yeah.

Jonathan Arnold -- Deutsche Bank -- Analyst

Thanks for all the extra color there guys. Thank you.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet.

Operator

Our next question comes from the line of Steve Fleishman of Wolfe Research. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Steve, how are you?

Steve Fleishman -- Wolfe Research -- Analyst

Yeah, hi, good morning. Hey, Tom. Good, thanks. So, just one question just on the guidance. So if you basically just take the $2.87 base that you mentioned and grow at the 4% to 6% in 2019, you'd be back to essentially what you are earning in 2018 at the high end. So just does that mainly explain that the 2018 upside has mainly been the favorable weather or how should I think about that?

Andrew Evans -- Chief Financial Officer, Executive Vice President

Yeah, Steve, I'd say that partially. So if we compare weather, it's about $0.08 improvement relative to what our normal expectation would be, but I think the balance of your math is correct. A good portion of our benefit is still coming from productive state regulatory reform and usage and customer growth.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And recall, when we went out with that original guidance, a lot of that was on the basis of $7 million shares associated with preserving the credit metrics with tax reform. What we've been able to do through these asset sales is essentially avoid now over $4 million shares. So the shares avoided certainly has a pickup in '18 relative to what our original estimate was.

Steve Fleishman -- Wolfe Research -- Analyst

Okay.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Steve, I'd say just do your math. More directly -- to answer your question more directly, if we take the $3.05 and back out about $0.08, we're still significantly above the top end of our initial guidance range since because of the factors we talked about.

Steve Fleishman -- Wolfe Research -- Analyst

Okay.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And O&M, we've done a really good job keeping O&M flat.

Andrew Evans -- Chief Financial Officer, Executive Vice President

That's right.

Steve Fleishman -- Wolfe Research -- Analyst

Okay. So just the obvious question then is, why does that not imply better than 4% to 6% after that? Or why you're going back to the same base of $2.87 for your growth rate?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Recall, you got the regulatory structure at Georgia. So, as we go through 2019 and '20 moving to in-service at '21, we have effects there through the earnings rates, which we've always kind of talked about that it would kind of be flattish or little bit, but within our 4% to 6% growth off of $2.87. The other thing we have is, when we think about the effects of selling Gulf Power or Florida City Gas or Elizabethtown or Mankato, we have a net effect. We had originally planned for taking some of the 7 million shares in the form of something like convert. (ph) So we kind of plan that in 2019. We may do that similar thing, but it's less of an effect in 2019. All the positive accretion we see from those deals will likely start to show in 2020 and 2021. I think we're going to see all -- the lion's share of the accretion in those two years, particularly.

That's a little bit of added retention for credit quality related to couple of (multiple speakers)

Steve Fleishman -- Wolfe Research -- Analyst

Okay, that all make sense. Just a couple other quick ones. On Mankato, I recall you bought that for like $400 million and then you've had to finish the expansion, so what's the $650 million relative to your investment?

Andrew Evans -- Chief Financial Officer, Executive Vice President

So a couple of hundred million dollars invested in the expansion of Mankato, the total invested today is about $580 million.

Steve Fleishman -- Wolfe Research -- Analyst

And when it's fully done, is it going to be about that $650 million or --?

Andrew Evans -- Chief Financial Officer, Executive Vice President

$580 million.

Steve Fleishman -- Wolfe Research -- Analyst

Or is that? $580 million is fully done. Okay. And then just one other question in terms of the kind of investor friendly actions like Mankato. What's the sense that it may be there might be more of those to do over time or over, let's say, the coming year or have you kind of exhausted you think?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah. No, there is plenty of opportunities to do more. We try to be very judicious and strategic in how we exercise those things, but they are certainly more on the palette of opportunities.

Steve Fleishman -- Wolfe Research -- Analyst

Okay. Good. Thanks.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Michael Weinstein of Credit Suisse. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hey, Michael.

Khanh Nguyen -- Credit Suisse -- Analyst

Hi, actually this is Khanh for Michael.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Okay, great.

Khanh Nguyen -- Credit Suisse -- Analyst

Thanks for taking our question. So just to follow on Steve's question there, you say there is lot more opportunities there, but is there a level of earnings contribution from Southern Power that you target or you'd be comfortable with going forward given all of the sale with the Gulf Power?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Say it again, I'm sorry, your question.

Khanh Nguyen -- Credit Suisse -- Analyst

The level of earnings contribution from Southern Power to the overall EPS. Yeah.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, sure. Variety of things here. We have been in the low-300s for some time at Southern Power. As we think about the different, we've remixed, so a lot of that earnings in the past, I don't know, two to three years with ITC related from solar and so you've got these big pops, we've intentionally, and I think we have some information in our slide material, transition from the kind of single year -- people are shaking their heads at me on that, on the slide material. But we've transitioned away from kind of the one-time pops to more the 10 year production tax credit associated with wind. So here is kind of where we think Southern Power ends up and that is earnings in kind of the low-200s growing at 5% to 10% and we really think also that's a function of the market. When we saw tax reform occur and we started hinting at this some last year. We really refocused growing a lot of earnings outside the state regulated utility franchises, both electric and gas. And right now what we see is, when you think about Southern's earnings, something like 95% of Southern's earnings come from our state-regulated electric and gas franchises. That's where we think the best opportunity to grow the business is and we think it's a very attractive risk return proposition.

Khanh Nguyen -- Credit Suisse -- Analyst

Yeah, that's great. Thank you. Also follow up on a smaller topic PowerSecure at this point, do you have any thoughts or comments on Bloom's ability to execute on their projects and permits?

Andrew Evans -- Chief Financial Officer, Executive Vice President

I won't execute -- I won't comment on Bloom broadly. I'll say this, we've had a terrific relationship with Bloom and where we have deployed the Bloom technology along with our own proprietary storage and switchgear, we've had a terrific experience and the customers love it. More broadly about PowerSecure, I think -- I haven't seen the final numbers on Michael, but for Irma and a variety of other, these storms, PowerSecure customers have been able to maintain operability during these worst of times at like a 98% availability level. It's been a terrific business. And what I say frequently on the stump is, Southern has been such an iconic company for so long and we have such great franchises and such a great customer base, it is however I think this kind of inexorable change where because technology enables it and because customers are requiring it, I think this old 100-year-old model of make, move and sell at a central station asset concentrated level may in fact start to dissipate over time. And that's why we did the acquisition of PowerSecure.

And I think what also is notable, if you look at the recent business of Southern Power, we grew up on selling to IOUs and munis and co-ops and lately we've been selling long term renewables to people like General Mills, General Motors, and Carnival Cruise Lines. So what we're seeing is an intersection of interest particularly in the commercial and industrial sectors between what Southern Power is now doing and what PowerSecure is doing. Add to that our fuel management capabilities at places like Sequent, we think that we not only can play well, but in fact influence how distributed infrastructure may occur in America. So it's a very exciting, it's a very small bet, we've always said that, but it's a very exciting option bet that we've made.

Khanh Nguyen -- Credit Suisse -- Analyst

Okay, that's great. Thank you so much.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet.

Operator

Our next question comes from the line of Julien Dumoulin-Smith of Bank of America. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hey, Julien.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey, good morning. Well done thus far.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

How about that?

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Yeah, absolutely. So I wanted to follow up a little bit on Southern Power just to clarify couple of things. What's the implied PE multiple on the latest sale and then how do you think about again like the accretive equity? I mean, just to come back a little bit to Steve's question, how much could you cumulatively rethink about eligible assets kind of displace off that remaining equity need if you think about what's on the table here?

Andrew Evans -- Chief Financial Officer, Executive Vice President

Well, so, Julien, this is Drew. I would start by saying, there's not really a good multiple that I could describe to you because it's not a plant in service and so you're probably better triangulating it off of something like dollars per kilowatt and we think it's a very fair market transaction and something that would be good for Northern States Power. Your second part of your question was really what else resides in the portfolio. I think we've got to take a look at each of the individual assets one by one, assess their importance to the Southern portfolio to our business partners that are the municipal and cooperative load aggregators within the state and we'll just continue to look at them one by one. We have a -- I think we've shown a strong preference for being to -- for participating in the construction of wind and solar assets we want to continue to do that. We're probably optimized from a tax perspective against those two asset classes and that's why you see movement now on something like Mankato, which is out of the gas portfolio.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah. We are trying to be very kind of dogmatic about M&A. I know I've been answering M&A questions since even when I was CFO, but we try to have as much discipline about buying as we do selling and a lot of times when you think about M&A in the asset space as Drew mentioned, it's who is the best owner, who can think about deriving synergies to improve their bottom line or who can blend that operation into their business to reduce risk. Those are kind of the ways we create value here. We think there's plenty more opportunities and we'll see how they turn out.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Just a little follow-on, as I talk more about the wind portfolio, I think the current tax equity transaction represents sort eight of the facilities within the portfolio and we will have continued construction and some other assets that would qualify under very similar construct. And so those will also be avenues for us for capital raise without disposition of asset.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Okay.

Operator

Our next question comes from the line of Anthony Crowdell of KeyBanc. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Anthony.

Anthony Crowdell -- KeyBanc -- Analyst

How are you doing, Tom? Good morning.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Awesome. Great.

Anthony Crowdell -- KeyBanc -- Analyst

Hopefully two easy questions. One is just a housekeeping item. The $0.10 you took for tax reform in this quarter, is that a timing issue that backs out the fourth quarter or we shouldn't see a reversal of that?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

No, you won't see a reversal. That's an ongoing matter. And remember, just broadly too, I think when we saw tax reform, essentially I got that question also on or I guess I created the question on CNBC this morning. It showed that our revenues missed -- even though our bottom line was way up, our revenues were off by 0.7%. We think that's a function of tax reform. In other words, what we did was reduce rates and about the rough math was about two-thirds of the benefit went into rate reductions, one-third of the benefit was captured to support higher equity ratios which in fact preserved our credit quality, our debt coverage ratios. So if I had to kind of think about it, it's an ongoing benefit of two-thirds of any dollar of tax reform benefit go to customers.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Yeah, I think in this particular circumstance they are $0.10, but that nets from $0.22 worth of benefit. And so it is something that -- that is the functioning of how it will be forever.

Anthony Crowdell -- KeyBanc -- Analyst

Great. And then (inaudible) more of a primer on the two indexes you're using for Vogtle on slide 31, so when you talk about an SPI of 1.02, is that mean you're getting 2% more hours done than what you planned? I'm just trying to understand how should I look at SPI and CPI?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, that's wonderful stuff. So in general, what you should look for on schedule, the SPI, is essentially one equals April and what is it, 1.2 or so equals November, somewhere around there.

Anthony Crowdell -- KeyBanc -- Analyst

So that mean that you are ahead of schedule?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

It means, I think we're on pace for our April kind of aggressive schedule. Now the real key to that, Anthony, is thinking about how we are able to keep pace on staffing at the site. Let me just review that again. At about the 120 level, 120,000 hours per week, what we were able to do we think is hit the November schedule. But we would do that without margin. So what we're trying to do is increase hours worked per week above 120. And I think it was Jonathan that remembered the 140,000 we could go 150,000, 160,000, but anything we do above that level increases our margin and enables us to better hit a more accelerated schedule, which right now we're planning for April, not November.

Anthony Crowdell -- KeyBanc -- Analyst

And that accelerated schedule, we should see the SPI rise like 1.05? Is that a fair understanding of it?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

No, sir. If we were not able to keep pace on getting staffing up to 140,000 by, I don't know, February, something like that, then we'll have less margin. The 1.0 would be April. So maybe instead of kind of April, you would end up with May or June or something like that. A lower number on SPI is better. And the whole staffing and the whole hours worked per week is all an objective to increase margin against the regulatory schedule of November.

Anthony Crowdell -- KeyBanc -- Analyst

Great. Thanks for taking my questions, Tom.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet, buddy. See you.

Operator

And our next question comes from the line of Paul Fremont of Mizuho. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Paul, good morning.

Paul Fremont -- Mizuho -- Analyst

I guess, my first question is -- relates to sort of Mankato. I'm still trying to understand the difference between the cash that you're getting through the door and the reduction in your equity need. Why wouldn't the reduction in your equity need be at least the $580 million, which is your cost basis in the plan?

Andrew Evans -- Chief Financial Officer, Executive Vice President

So, if you remember, it's a capital-based asset, so we've acquired a couple of years ago. There is some depreciation associated with that asset and so the deltas really just reflects what the current tax basis is.

Paul Fremont -- Mizuho -- Analyst

Okay. So the difference is -- the difference between the $650 million and the $400 million is all tax-driven?

Andrew Evans -- Chief Financial Officer, Executive Vice President

That and we also rebalance our capital structure so that we meet our FFO to debt targets and so a portion of proceeds will be used to pay down debt.

Paul Fremont -- Mizuho -- Analyst

Okay.

Andrew Evans -- Chief Financial Officer, Executive Vice President

We try to do all of this -- try to calculate all of our sales based on the equity reduction knowing that some -- that the proceeds will be used for both purposes, repayment of debt and reduction of equity need.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And recall, the whole $7 billion that we've been targeting is really a thicker equity ratio for the company, in general, which gets us back to the coverage ratios at the Southern level.

Paul Fremont -- Mizuho -- Analyst

Right. Okay, so it also relates to your attempting to hit some target of FFO to debt, which I assume is in the 15% range?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

That's correct. 16%.

Paul Fremont -- Mizuho -- Analyst

And then how much -- what was the weather year-to-date relative to normal?

Andrew Evans -- Chief Financial Officer, Executive Vice President

About $0.08 in total.

Paul Fremont -- Mizuho -- Analyst

Okay. And then at Southern Power, in order to grow the 5% to 10%, how much of that sort of -- I think you've identified up to 500 million of incremental investment that's not in your CapEx numbers. How much of that do you need to do or is all of the growth coming from tax equity transactions which are not affecting your cash outlays?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, let's review the bidding there. In the old -- kind of in the prior numbers we gave you, it was $1.5 billion a year is what we were looking at and we've ratcheted that back to about $500 million a year. When you look at the two ranges we just gave you growing at 5% and growing at 10%, the $500 million a year would get us to the 10% number kind of no growth keeps us -- no incremental growth gets us at a long-term 5% earnings slope.

Paul Fremont -- Mizuho -- Analyst

That no incremental capital gets you to the 5%.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

That's right.

Paul Fremont -- Mizuho -- Analyst

And does that incorporate some assumption of transactions that you're doing on a tax equity basis or not?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

It assumes what we've announced. In other words, the solar, the wind, but nothing further. We'll evaluate tax equity going forward. We're aiding pretty dramatically any kind of carry forward position we have. And so we'll assess going forward whether we want to do tax equity or just carry the production tax credits ourselves.

Paul Fremont -- Mizuho -- Analyst

And then last question for me, you indicated that you're done with respect to equity for the year, so can we use the ending share count at the end of the third quarter as the ending share count for the year?

Andrew Evans -- Chief Financial Officer, Executive Vice President

No, I don't think that's probably fair. We have drip and dribbled still continue through balance of year. The ATM is the one that we would -- may modulate based on our expectations, but -- and our success really in raising capital on these methods, but we still have to preserve all the options we've got through the balance of the year.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah. And it's really not just the balance of the year, it's everything because this will look at other investor friendly options, et cetera. So we'll balance all that together.

Paul Fremont -- Mizuho -- Analyst

Great. Thank you very much.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet. Thank you.

Operator

Our next question comes from the line of Ali Agha of SunTrust. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Ali. Good morning.

Ali Agha -- SunTrust -- Analyst

Good morning. Tom and Drew, just wanted to clarify a few points. But one on Mankato, just to be clear, when the plant is fully running with expansion complete et cetera, what sort of the annual net income that would go away now that otherwise would have been flowing through the Southern numbers?

Andrew Evans -- Chief Financial Officer, Executive Vice President

Ali, I'd just have to get back to you on it, I don't recall what the projection was. I should probably know it, but don't. Something we can talk to you about in the post-call.

Ali Agha -- SunTrust -- Analyst

Okay. But to be clear, when you all talk about Southern Power's base of low-200 number, that includes both the tax equity transaction as well as Mankato or is that requiring further adjustments?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

No, it includes all of those effects.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Ali, the other thing I'd say is that the Mankato sale is generally accretive to us, about $0.01, so that's the other way to triangulate the answer that you -- the first question you asked.

Ali Agha -- SunTrust -- Analyst

Okay. And then, secondly, if I recall correctly, you folks have been budgeting your outlook overall at a flattish sort of broad growth profile and as you've been pointing out, your are running at about 1%. Does that change your outlook and if I recall, 1% pickup, all else being equal, it's about an incremental $0.06 of annual earnings. Is that a fair way to think about this?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, I don't know whether you saw my little appearance on TV this morning. Look, the numbers we are showing this quarter are really at the tops of what we've been talking about for some years now, 1.4% growth quarter-over-quarter in retail sales, 2.4% in industrial, 1% growth in customers. Look, these are all really good numbers. I would just throw a wee bit of caution on all that optimism. With my work at the Fed and everything else and our own analysis, we do look at something that I call momentum numbers and I'm seeing momentum that looks kind of flat. That is, you still may be positive quarter-over-quarter, but if you are less positive, I call that a negative.

The momentum numbers would indicate that there is a bit of a pause in the economy and absent any positive action, we could see those numbers go back down a bit. What could unleash it? I think what we're seeing in the good numbers is the effect of tax reform and lower regulation. And so people are investing in their businesses, but they're doing it largely in their current sites or expanding a current site. I think there is another wave, but that wave is being suppressed right now through kind of long-term concern about the tax war skirmish, whatever phrase you want to use. If we could resolve some of that uncertainty in the worldwide economic market, I think there is another breadth to take on continued economic expansion, which would really help those numbers. That's kind of what I'm seeing right now, but, boy, if you look at our manufacturing numbers, for example, Drew, virtually all of them are positive.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Right. Certainly on the industrial side too, strong segments across all segments.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And because our job growth is great, unemployment rate is still low, people will come to the South East to get good jobs and we will continue to deliver job to the public. It's a really good dynamic right now. I just want to throw just a little bit of caution on it.

Ali Agha -- SunTrust -- Analyst

Understood. And then one last one. If I recall correctly, from your prior equity plans, I believe the goal was to raise about $1.4 billion of equity in 2018. I know you've done about $1 billion through October. Is that still the target we should be assuming, $1.4 billion for the year?

Andrew Evans -- Chief Financial Officer, Executive Vice President

It really does move through time and the goal is through 2022. I think we've done some very proactive things now with the sale of Mankato and being able to get $1 billion worth of equity up, we will -- I want to be able to preserve our options through balance of the year. The dividend reinvestment plan will still be functioning and the ATM is still open, but I don't know if I'm answering your question directly, I think we will continue to issue shares at least in some form through balance of the year.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

But we are on hold on ATM. Yeah.

Ali Agha -- SunTrust -- Analyst

Right. And just to clarify, Drew, just your annual capacity to generate equity through the internal programs is how much and how much has been done through the nine months?

Andrew Evans -- Chief Financial Officer, Executive Vice President

$500 million or $600 million per annum through all programs, really options and dividend reinvestment.

Ali Agha -- SunTrust -- Analyst

Right. And how much have we done so far?

Andrew Evans -- Chief Financial Officer, Executive Vice President

This year?

Ali Agha -- SunTrust -- Analyst

Yes.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Three quarters of that amount.

Ali Agha -- SunTrust -- Analyst

I got you. Thank you very much.

Andrew Evans -- Chief Financial Officer, Executive Vice President

It's pretty straight line for those two programs. The old options really are variable, we can't control the exercise of, but dividend reinvestment release, the principal one and so the next, that happens as dividends are declared and paid.

Ali Agha -- SunTrust -- Analyst

Understood. Thanks so much.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Andrew Weisel of Scotia Howard Weil. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Good morning, Andrew.

Andrew Weisel -- Scotia Howard Weil -- Analyst

Good morning, guys. You covered just about everything. I guess maybe just one last one I want to ask about the O&Ms. I believe you said you've been happy with what you've been doing year-to-date, but that's been driving the upside to this year's numbers. My question is, how do you think about the cost savings you've seen as being structural and recurring in the future years versus sort of one-time savings that might not repeat in 2019 and beyond?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

No, these are structural. Look, we've been working on something called modernization here and the whole idea is, we are making investments in our business largely technology driven, I would say, otherwise kind of environmental-driven, ash pond work, a variety of other things. And what we're able to do is, for example, through technology provide customers which a -- with like a 4 times greater point of presence while reducing the fixed assets in the field through investments in local towns and a variety of other things. So we've actually been able to improve customer service and create structural reductions in O&M. Georgia Power clearly has been a leader in that and we think those things are sustainable around the clock here at Southern and there is more to go. So we'll keep working on it.

Andrew Evans -- Chief Financial Officer, Executive Vice President

It's probably fair to say that the results will vary by franchise and we're in different states of maturity in each, but the goal really is to grind inflation ultimately out of the business in aggregate, and see if we can do more of that from the parent and then really as an offset to a lot of the capital that needs to be invested into rate base and into the franchise.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And some of that sounds kind of ominous, but if you look at Georgia Power by reducing kind of capital in the field and investing in technology in this multiplication of points of presence, they were actually voted the Most Trusted electric Utility in the United States last year. We can improve customer service and at the same time take cost out of the business.

Andrew Weisel -- Scotia Howard Weil -- Analyst

But just to clarify on that, you talked on the last call about finding income-generating CapEx opportunities. Should we think of these as being a net increase or decrease to CapEx? And I know you will get more details in the next call, but directionally, how does that net out?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

It's an increasing CapEx. The objective will be take O&M down, increase CapEx, keeping rates constant, all other things being equal.

Andrew Weisel -- Scotia Howard Weil -- Analyst

Got it. Okay. Then lastly, the 4% to 6%, what did that assume for O&M over the long term period?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

We will assume the regular growth rate of like 3%, but as Drew said, we're not going to be satisfied with growing O&M at 3%. We're going to grind it away to zero, it's what we're hoping for.

Andrew Weisel -- Scotia Howard Weil -- Analyst

Got it. Okay, thank you.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet.

Operator

And our next question comes from the line of Michael Lapides of Goldman Sachs. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Good morning, Michael.

Michael Lapides -- Goldman Sachs -- Analyst

Good morning, Tom. Thank you for taking my question today. Real quick, when you look at your generation fleet across the different subsidiaries, where do you think the greatest opportunity is for fleet transformation, meaning the potential for incremental coal retirements, the potential for significant growth in either solar or gas-fired generation or a combination of both?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yes, sure. We're selling our -- I think it's our -- our most heavy coal generator is Gulf Power. NextEra is buying them. We have been -- Georgia Power has been a leader in the United States. In fact, remember, they were voted the number one investor-owned utility by the solar industry. They have the largest voluntary solar program in the United States. My sense is solar will continue to be in favor in the portfolio of Georgia and even Alabama, we now see -- when we see some solar and we continue to rethink opportunities in gas. So Mississippi is really pretty small. So when you think about our whole portfolio now, what you see is a growing trend as we complete Vogtle, maintaining nuclear, growing gas with the influence of coal over time dissipating. That's the trend you should see. Much more renewables. Before I got here, we were zero on renewables. Now across our fleet, including Southern Power, we're around 10%. That's for a company that produces much energy as the nation of Australia, roundabout, that's a pretty big move.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thank you, Tom. Much appreciated.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet.

Operator

And our next question comes from the line of Praful Mehta of Citigroup. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Praful, how are you?

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Thank you so much. Hi, guys.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hey.

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Hi. So, maybe first touch on the way you're measuring EPS accretion as you talk about these different transactions, what is the baseline for that? Is it assuming a baseline with some equity issuances or just so I understand, what is the basic (inaudible) against rich EPS accretion is being mentioned?

Andrew Evans -- Chief Financial Officer, Executive Vice President

Yeah, that's effectively it. So we're looking at our -- the projection for net income for the underlying asset, the effects for us on EPS a share, of earnings per share, we're really looking at the income relative to the cost of avoiding issuance of new equity.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah, so you lose net income, but you don't have the shares, and if the sales price is beneficial, you get accretion.

Andrew Evans -- Chief Financial Officer, Executive Vice President

The simplest form of this is sort of the after-tax proceeds on a per share basis relative to our own share price, although that varies with tax position and basis in the underlying asset, but that's the calculation.

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

I got you. So the -- some assumption that went into what price at which you would issue the equity kind of drives a little bit of the analysis as well?

Andrew Evans -- Chief Financial Officer, Executive Vice President

It does.

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Got it. All right. And then maybe just wanted to touch on one of the points you made earlier which was on the tax equity side. The point you made was, I think you want to hold off to doing too much more tax equity. I didn't really understand the reason why. If you could just clarify why -- is there any kind of constraint on doing more tax equity or not?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

No. No constrain at all. The issue is, we just look on a case-by-case basis. When you think about the Florida transaction we just did, we had an enormous kind of carry forward position. That's a taxable transaction. That takes away all these asset sales that are taxable, eats away at that carryforward position. We're now in a position where we can think on a case-by-case basis, whether we want to carry the tax credits and PTCs, ITCs, whatever they are or whether we'd rather sell the tax benefits to somebody else. It's really a pretty straightforward calculation as to the time value of cash whether we're better having in or whether somebody else is.

Andrew Evans -- Chief Financial Officer, Executive Vice President

I'd say, we've come close to optimization with the current portfolio that what Tom described is absolutely true for future construction. We will also have assets that mature enough so this becomes a possibility even within the existing portfolio, but we will look at it against share issuance at every point.

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Understood. And so, where does your current cash tax position stand, as in, when do you expect to be cash tax (inaudible) again given all these earning gains that you had through these asset sales?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah. The numbers move over time to kind of 23, 24.

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Got you. Understood. Thank you. And then finally, just quickly on Vogtle. The labor need that you're saying, you're hoping to grow above the 120,000. Is there a particular market like the Canadian market in terms of what you're looking to tap to get more workers or how should we think about where those additional workers come from at this point?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

We have been working with the Department of Labor to source labor from Canada. Yes, we have. But there are other ways to get that labor too. Remember, this helping hands thing is a new strategy. I don't know how long is it, probably four to six month old, something like that, but it's a way to resegment the work, so that we need fewer electricians and we got other craft labor take big segments of work, like pulling cable through cable trays. Ultimately, you have to connect the cable, so you need electricians. Plus other ideas we have about sourcing through reducing attrition on the site, reducing absenteeism on the site, and increasing productivity. We're very thoughtful about a variety of ways. Even if we don't get labor from Canada, we may be able to source enough personnel to accomplish the work we need and get the margins we want.

One other big factor, we haven't spent a lot of time on, we continually work on the site with lessons learned from China and working with our prime contractor Bechtel to resequence work, optimize work processes, and we've achieved much better productivity that witness the latest numbers as a result of those good efforts. I personally call or we speak -- Brendan Bechtel and I -- once every two weeks or so. Steve Kuczynski, Head of our Nuclear Group is on-site all the time. We are working with the executives of Bechtel and Southern Nuclear to always optimize the workflow and we've been able to improve productivity as a result of that. That also goes to the need and timing of new personnel on-site. That's something also I alluded to, but wasn't as direct as I am now.

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Got you. That's super helpful. Thanks so much guys.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet. Thank you.

Operator

Our next question comes from the line of Paul Patterson of Glenrock Associates. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Paul, how are you?

Paul Patterson -- Glenrock Associates -- Analyst

How is it going?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Terrific.

Paul Patterson -- Glenrock Associates -- Analyst

Just a sort of -- almost everything has been asked and answered, but just back to the helping hands. Is there sort of any limitation? I mean, this sort of sounds like sort of a -- it sounds like there's -- it opens up all sorts of opportunity. I mean, is there any limit, I guess, in terms of how much that could be employed or how should we think about that? I mean, it just seems -- it seems like --?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

There certainly are limits. I mean, the kind of obvious limit I just said was ultimately we'll need electricians to connect the cables. We think kind of right now we have displaced 150 people through this helping hands there, but I think you're right. I think -- but here again, let me give kudos to the labor unions here. We've always had a great relationship with folks like Sean McGarvey and others. It's a real partnership on-site between management, Bechtel, and the unions. Everybody wants this site to be successful and the unions have been super cooperative and creative and thoughtful in how we deploy personnel here and get them to work together. They've really been terrific.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. And then I guess just sort of, there were lot of numbers in terms of productivity et cetera and how things have sort of changed and you spoke to Jonathan Arnold and Greg about this. I just sort of want to -- just to make things clear, you guys are still very confident and you feel that you're on track to meet those productivity numbers, they are just going to be the productivity levels is going to be -- is this going to be little bit later than you thought it was going to be, is that how we should think about it?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yes, I mean, we've been 110,000, we've just got 120,000 in order to get and we think kind of at the 120,000 level, we can hit November. Now we'll use up all our margin. So the objective right now based on this kind of ambitious schedule that we've laid out is to do the best we can to improve margin, to get back to kind of in April in service. In order to do that, we need to continuously evaluate, continuously monitor, but otherwise get new people to the site and get the hours worked per week up. That is how we improve margin.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. And you feel that you're going to -- that's very achievable, right? I just want to make sure I understand, how confident you guys are in being able to do that.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

We certainly are confident of our ability to attract more people to the site and therefore improve margins. We certainly are confident and this remains unchanged of our ability to hit November. What we're about now is improving the margins in November and recall, the on-site schedule is one where we're aiming at April.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. I got it. I appreciate it. Thanks so much.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet. Thank you.

Operator

And our next question comes from the line of Kit Konolige of Bloomberg Intelligence. Please proceed.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Kit, hope you are well?

Kit Konolige -- Bloomberg Intelligence -- Analyst

Hi, guys. Yeah, everything is good. How about you?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Fantastic.

Kit Konolige -- Bloomberg Intelligence -- Analyst

All right. I wanted in a little bit different arena to ask about the sales numbers. So, year-to-date, you are showing positive weather-adjusted sales, looks like pretty well spread across most of the customer classes. Can you give us some color on how confident you are that that's a realistic ongoing sales growth number, and does it have more to do with customer usage or increase in customers? Just any sense of how much that can be projected into the future?

Andrew Evans -- Chief Financial Officer, Executive Vice President

So I think all good questions related to sales. Our retail sales growth year-to-date weather-normalized is up about 1.1%. That's pretty broad based. If you look at residential, it's 0.08%, commercial is about 0.6% and industrial is up almost 2% year-to-date. If I look at weather in the year about $0.05 of benefit occurred in the first half and about $0.03 that occurred in this last quarter. It certainly was a very strong third quarter for generation. Customer usage is generally flat. That's maybe a little bit better than what we had initially anticipated. Efficiency will be a persistent trend and one that we certainly aren't here to buck. The efficiency of underlying equipment has improved materially from its original placements. And so it really will rely on in-migration into our states, good manufacturing and good industrial demand and I think retail will plug right along, but will be partially offset certainly by efficiency.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hey, Drew, the other thing that -- we always kind of laugh at each other in the group I think is weather-adjusted numbers. We really do work hard at getting good numbers. But I'm always a little skeptical as to the weather adjustment. For example, in '17 we had a hurricane that -- so we had to adjust that the effect of hurricane year-over-year. Next year, we've had Hurricane Michael in the fourth quarter, we're going to adjust all that out. These adjustments we do the best we can. I'm always a little squeamish about them.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Yeah. I would say the margin of error -- our margin of error in the net is probably in the tenths of a percent. We had a very abnormal January that was kind of outside of the normal distribution. We had one of the warmest Septembers and we're really not making any hurricane adjustment. We still had really good consumption despite having a number of customers off -- benefited by the fact that it was just a very short period of time, and an excellent reconstruction effort throughout Florida and Georgia.

Kit Konolige -- Bloomberg Intelligence -- Analyst

Great. Very helpful insight.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Well, thank you.

Operator

Our next question comes from the line of Charles Fishman of Morningstar Research. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hello, Charles, good morning.

Charles Fishman -- Morningstar Research -- Analyst

Good morning. Hey. Just on China, it sounds like you still have people there. I wonder if, Tom, if you could say roughly how many? There are still one or two plants under construction, you've got people there, you've got people at the two operating plants. Do you -- how long are you going to keeping them there? If you can just -- no details just if you can provide little more color.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yeah. We've had about couple dozen people over there. They are now starting to matriculate back to the US. So we're not going to have permanent staffing there. We've really been there during the construction. So now that these guys are going in-service, there's really no need to have them there. We continue to have a good exchange with the Chinese about the plants and the NRC frankly has been very constructive in thinking about how those plants have operated and started up much better than what people expected. We had kept our own estimates on start-up constant. But we're very gratified with the experience the Chinese have had.

Charles Fishman -- Morningstar Research -- Analyst

Okay, that's all I had. Thanks, Tom.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet.

Operator

And our next question comes from the line of Ashar Khan of Verition Fund Management. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Ashar, how are you?

Ashar Khan -- Verition Fund Management -- Analyst

Pretty good, Tom. Thanks. Can I just ask where are we with our equity ratios or expect to be by the end of the year versus what is authorized? And my second follow-up question is, how should we use the proceeds? They're going to be like B6.6 billion of proceeds in the first half of 2019 that you're going to accrue from the sales. What would be the use of funds for those proceeds?

Andrew Evans -- Chief Financial Officer, Executive Vice President

So on equity ratios, I think we are at target in the Georgia franchises which is right at 55%. We've got a longer ramp (technical difficulty) Alabama's capitalization and expect for 55% by 2025 there. Your question was around use of proceeds, the entire backlog of equity requirement is there -- really to meet those equity needs. And so we will fund as we generate.

Ashar Khan -- Verition Fund Management -- Analyst

But can I just ask you like the $6.6 billion, right, so can we assume that you don't need equity next year because you will be getting like $6.6 billion of proceeds coming in in the first six months of '19. This balance, the rest is used for funding and debt reduction or how should I use that $6.6 billion?

Andrew Evans -- Chief Financial Officer, Executive Vice President

Right. So I think we've got a reconciliation of it in the slides that we put out with the call. The total need has been reduced to $2.4 billion.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Over the next five years.

Andrew Evans -- Chief Financial Officer, Executive Vice President

Over the next five years.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

And so we could be creative in how we do that, but we will follow-up with --

Ashar Khan -- Verition Fund Management -- Analyst

I was trying to get some color on that is that, do you need to issue equity next year because you're getting so many proceeds in '19?

Andrew Evans -- Chief Financial Officer, Executive Vice President

Absolutely. So page eight is the best place for you to go and we can certainly follow up with you and IR. But even though the asset sale in Florida may represent over $6 billion, we are very cognizant of our credit quality. And so that comes with an associated pay down of debt that will help us maintain our FFO to debt ratios and our debt to total capital.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

So your triangulation there is, it's going to get to a 16% FFO to debt. That would imply some level of equity.

Andrew Evans -- Chief Financial Officer, Executive Vice President

That's right.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Now whether we take it there, accelerate or not, we have flexibility to do that.

Ashar Khan -- Verition Fund Management -- Analyst

Okay, thank you so much.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

You bet. Thank you.

Operator

And our final question comes from the line of Carl Seligson of Utility Financial Experts. Please proceed with your question.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Carl Seligson, be still my beating heart.

Carl Seligson -- Utility Financial Experts -- Analyst

You are wonderful, Tom. I hope it clears up (inaudible) so you don't have to keep reaching for whatever you're reaching for. Tom, are you maintaining a list or either on paper or in your head or something of people who because of their interest like Northern States interest might be interested in future transactions and have you got a list of future possible transactions because you've started being a financial expert, I just wonder where you're going with it?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

I'm sorry, Carl, what was the point of that?

Carl Seligson -- Utility Financial Experts -- Analyst

I don't know.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Hey, look --

Carl Seligson -- Utility Financial Experts -- Analyst

Is there anything more coming down line in your head, if not actually on paper as far as asset transactions so that you could -- as a remark?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

The world of M&A covers assets, they cover companies, it covers everything and we try and have the same discipline whether we're buying or selling. Particularly I thought we bought very smartly with AGL Resources. And when you think about some of the PE multiples and implied share price, therefore, of the sales that we've done, we think we've accreted enormously to shareholder value well over, I don't know, $3 billion or $4 billion here. We are always looking over our hand here whether we're a buyer or a seller. And you're right, I mean we kind of laugh about it, but like my good friend Ben Folk up there at Excel, (ph) I did pick up the phone and called Ben and just see what his interest was. We have plenty of opportunities whether to use the phone or bump into each other at a variety of meetings that we have. It's a very interesting environment right now. The good news is, it's an option-laden environment. I think there's a lot of interest and activity both on the buying and selling realm for a variety of people, some of which are conventional strategic buyers and some of which are the financial buyers, the non-strategics. Anyway, there is a very active evaluation going on in the market right now and we're certainly participating in that.

Andrew Evans -- Chief Financial Officer, Executive Vice President

A best owner is the really strong internal concept in Northern States as the off-taker for Mankato. It makes a lot of sense for business simplification for both ourselves and for that company and I think that's a very good reason why they are the best owner of that asset.

Carl Seligson -- Utility Financial Experts -- Analyst

I think that makes a lot of sense. Thanks for that add-on. And, Tom, I'm sorry, I'm going to miss you all in San Francisco, but I can't make it this year.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Man, I hate that, but we are good catching up. And I am -- hey, I am so appreciative of you joining us on the call. Really good hearing from you.

Carl Seligson -- Utility Financial Experts -- Analyst

Thank you, my friend. Take care.

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Yes, sir. Thank you.

Operator

And ladies and gentlemen, that will conclude today's question-and-answer session. Sir, are there any closing remarks?

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

No. It has been quite a year. It's been a terrific quarter and I think as we've suggested that we've got a great foundation to continue to sustain this performance. Very gratified with our progress at Vogtle. We continue to work hard. We know there will always be challenges, but we appreciate your attention on today's call, and look forward to chatting with you in the next week or so. See you soon. Thanks, everybody.

Operator

And ladies and gentlemen, that does conclude The Southern Company's third quarter 2018 earnings call. We thank you for your participation and you may now disconnect your lines. Thank you, and have a great rest of the day.

Duration: 85 minutes

Call participants:

Scott Gammill -- Investor Relations Director

Thomas Fanning -- Chairman of the Board, President, Chief Executive Officer

Andrew Evans -- Chief Financial Officer, Executive Vice President

Greg Gordon -- Evercore ISI -- Analyst

Jonathan Arnold -- Deutsche Bank -- Analyst

Steve Fleishman -- Wolfe Research -- Analyst

Khanh Nguyen -- Credit Suisse -- Analyst

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Anthony Crowdell -- KeyBanc -- Analyst

Paul Fremont -- Mizuho -- Analyst

Ali Agha -- SunTrust -- Analyst

Andrew Weisel -- Scotia Howard Weil -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Praful Mehta -- Citigroup Global Markets, Inc. -- Analyst

Paul Patterson -- Glenrock Associates -- Analyst

Kit Konolige -- Bloomberg Intelligence -- Analyst

Charles Fishman -- Morningstar Research -- Analyst

Ashar Khan -- Verition Fund Management -- Analyst

Carl Seligson -- Utility Financial Experts -- Analyst

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