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DATE
Thursday, July 31, 2025 at 5:00 p.m. ET
CALL PARTICIPANTS
Chairman, President, and Chief Executive Officer — Chris Womack
Chief Financial Officer — David Arcaro
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TAKEAWAYS
Georgia Power Rate Agreement: The 2022 alternate rate plan was extended, eliminating the need for a 2025 base rate case and locking base rates through February 19, 2028, except for possible storm-related adjustments.
Generation Certification Filing: Georgia Power filed to certify approximately 10 gigawatts of new generation as part of its 2025 integrated resource plan (IRP), with a final determination by the Georgia Public Service Commission expected later in 2025, including about 7 gigawatts of Georgia Power-owned assets and 2.8 gigawatts in third-party purchase power agreements; approval is pending from the Georgia Public Service Commission.
Base Capital Plan Increase: The five-year base capital plan increased by $13 billion, reaching $76 billion, with $12 billion attributable to state-regulated generation and modernization projects through 2029 and $800 million for Southern Power wind repowering projects as of Q2 2025.
Equity Funding: Approximately 40% of the $13 billion capital plan increase, or $5 billion, will be funded through new equity or equity equivalents by 2029, with less than $4 billion of incremental equity remaining to be raised through 2029.
Rate Base Growth Outlook: reflecting increased capital deployment.
FFO to Debt Metric: David Arcaro reported the twelve-month FFO to debt is “kind of 14.3, 14.4 unadjusted, more like 13 adjusted for the Helene” for the period ended prior to the Q2 2025 earnings call, with a targeted improvement to approximately 17% FFO to debt later in the planning horizon.
IRP Demand Drivers: Georgia Power’s 2025 integrated resource plan approval highlighted ongoing demand acceleration, with authorization for at least 6 gigawatts of new procurement options tied to projected large load growth.
Repowering and Future Opportunities: Southern Power commenced repowering at three additional wind sites totaling approximately $800 million, with all projects under construction and projected to be in service by 2027, and management noted several contracts will come up for renewal in the early 2030s with potential to reprice capacity.
Discipline on Asset Sales: Chris Womack stated, “we're always evaluating. I mean, if there's a better owner, and they're willing to pay, we'll be a great seller in those circumstances.” but would not comment on specific rumors or assets such as PowerSecure.
Large Load Pipeline Update: Management anticipates a filing with the Georgia Public Service Commission in mid-August and an updated load forecast in September, citing that the “pipeline continuing to grow.”
Return Profile at Southern Power: David Arcaro explained, “We try to set these things up with long-term creditworthy counterparties. Try not to take fuel risk, and that usually plays out for us to be a little bit higher than our state-regulated returns historically.”
Leadership Transition: Chris Womack highlighted the retirement of Dan as CFO and David Arcaro assuming the CFO role, emphasizing continuity and depth in management succession.
SUMMARY
The Southern Company (SO 1.06%) announced a $13 billion increase to its five-year base capital plan, elevating planned investment to $76 billion, with significant new regulated generation projects and wind repowering included. Management’s regulatory settlements in Georgia remove the need for near-term base rate cases and establish capital expenditure visibility, while filings for approximately 10 gigawatts of new capacity, as requested by Georgia Power in certification filings to the Georgia Public Service Commission for the 2025 integrated resource plan, indicate continued load growth momentum, particularly from large-scale industrial and data center activity. Equity requirements arising from expanded capital deployment are being proactively managed through at-the-market issuances and forward sales, supporting progress toward a 17% FFO to debt target later in the forecast horizon, and filings to update the large load forecast are expected in the coming months, reflecting ongoing demand strength and further upside potential from future regulatory approvals.
David Arcaro confirmed additional equity needs will be managed in a “credit-supportive manner” referencing “less than $4 billion” to be addressed by 2029 after $1.2 billion raised through ATM forward sales since the last earnings call.
Repowering and new contracting opportunities at Southern Power may allow for repricing of capacity in the next decade as existing agreements expire, potentially enhancing unregulated returns.
Investments in Alabama and Mississippi are advancing, including “over a thousand megawatts of data center projects across those two states,” as noted in the Q2 2025 earnings call, and associated transmission-distribution upgrades are underway.
Management’s disciplined approach excludes uncommitted projects from capital planning, maintaining a conservative growth outlook despite robust pipeline activity and demand tailwinds.
INDUSTRY GLOSSARY
BESS (Battery Energy Storage System): Grid-scale battery arrays used to store and dispatch electricity, often paired with renewables or for grid reliability.
FFO to Debt: The ratio of funds from operations to total debt, a key credit metric indicating company leverage and cash flow health.
IRP (Integrated Resource Plan): A regulated utility’s multi-year plan for meeting forecasted customer demand through resource procurement and infrastructure investment.
PPA (Purchase Power Agreement): Long-term contract under which a buyer agrees to purchase electricity from a producer at pre-negotiated terms.
ATM (At-the-Market program): An equity issuance mechanism allowing shares to be sold incrementally into the market at prevailing prices.
OEM (Original Equipment Manufacturer): Companies that produce and supply major equipment components, such as turbines, for utility-scale projects.
EPC (Engineering, Procurement, and Construction): Firms contracted to design, supply, and build infrastructure assets, especially power plants or transmission lines.
Full Conference Call Transcript
Chris Womack: Communicated. Our disciplined approach includes pricing and contract terms designed to protect existing customers and our investments while also generating economic benefits for all customers. In May, Georgia Power and the Georgia Public Service Commission public interest advocacy staff, along with several other interveners, reached a settlement that demonstrated the reality of these economic benefits for customers. The stipulated agreement, which was unanimously approved by the Georgia Public Service Commission, extends Georgia Power's 2022 alternate rate plan, ultimately precluding the need for a 2025 base rate case filing and keeping base rates stable and predictable over the next three years through February 19, 2028, with the exception of any future recovery of storm-related costs, including those related to Hurricane Helene.
Overall, this outcome demonstrates our commitment to capturing the benefits of this robust projected economic growth and prioritizing customer affordability. We believe this outcome, which preserves the existing regulatory framework in Georgia, benefits all stakeholders. Our vertically integrated market and construct orderly regulatory processes continue to help ensure we have the critical resources necessary to reliably and affordably serve our growing states. Earlier this month, the Georgia Public Service Commission unanimously approved a stipulated agreement between Georgia Power and the Georgia PSC public interest advocacy staff regarding Georgia Power's 2025 integrated resource plan or IRP.
This approval provided for continued investment in the existing fleet, with plant life extensions at multiple steam units, more capacity at existing nuclear and natural gas facilities, and the modernization of hydro facilities to increase output and extend life. The 2025 IRP outcome also further highlighted and confirmed the need for new generation resources previously approved in our prior IRPs as we build to serve projected growth. Under the approved IRP, Georgia Power received authorization to provide generation procurement options for at least six gigawatts to meet the increase in Georgia Power system demand.
In accordance with the IRP process, yesterday, Georgia Power filed to certify eight gigawatts of new generation resources resulting from the all-source request for proposals or RFPs. This competitive process, which was overseen by an independent evaluator, resulted in a mix of purchase power agreements or PPAs and multiple Georgia Power-owned resources being selected as the best choice for customers to meet the projected incremental capacity need by February 19, 2031. Of these, approximately 1.2 gigawatts of the awards were for third-party PPAs, including 732 megawatts from existing Southern Power capacity.
The remaining 6.8 gigawatts is a mix of Georgia Power-owned resources from a variety of technology types, including new combined cycle natural gas facilities, stand-alone battery energy storage systems, or BESS, and solar power BESS options. Further, to meet the total capacity need identified as a part of Georgia Power's 2025 IRP load forecast, Georgia Power also requested certification for approximately two gigawatts of additional generation capacity through a supplemental filing. This includes 1.6 gigawatts from third-party PPAs, with the remainder consisting of Georgia Power-owned resources to address near-term projected generation needs. In summary, Georgia Power has filed a request to certify approximately 10 gigawatts of new generation, which includes seven gigawatts of Georgia Power-owned resources.
These requests will be reviewed by the Georgia PSC, with the final determination by the commission expected later this year. I'll now turn the call over to David to share more about the capital investment and financing implications associated with these orderly regulatory processes.
David Arcaro: Thanks, Chris. Good afternoon, everyone. Earlier this year, in addition to our $63 billion five-year base capital plan, we highlighted $10 billion to $15 billion of projected potential incremental regulated capital investment through 2029. With the approval of Georgia Power's 2025 IRP, along with the certification filings for new resources, we now have improved line of sight on our expected capital opportunities and are adding $12 billion of state-regulated capital into our five-year base capital plan. This represents the capital investment associated with the low end of the six to 10 gigawatt range for new resources from the certification processes Chris mentioned earlier, along with investments associated with upgrades and modernization of existing resources approved in the 2025 IRP.
Should the Georgia PSC confirm the need for and ultimately certify the entire 10 gigawatts of new generation, there could be up to an additional $4 billion of new state-regulated generation capital through 2029. Separately, Southern Power, our competitive power business, has commenced repowering at three additional wind facilities in our existing portfolio, all of which have begun construction and are projected to be in service by 2027. These projects represent approximately $800 million of additional investment, which is now included in our base capital plan.
In total, our five-year base capital plan has increased $13 billion from $63 billion to $76 billion, with potential upside of approximately $5 billion still pending, tied to the generation procurement certifications in Georgia and potential FERC-regulated gas pipeline expansions at Southern Company Gas. We remain committed to funding our capital plan in a credit-supportive manner that supports our strong investment-grade credit ratings. As we highlighted in our May earnings call, our financing activity through the first quarter, along with our internal equity plans projected through 2029, resulted in a clear path to fully address the $4 billion equity needs in our original $63 billion base capital plan.
The increase in our base capital plan of $13 billion is projected to be funded with approximately 40% of additional equity or equity equivalents, which represents an incremental $5 billion through 2029. This level of equity content supports our credit quality and our progress toward our credit metric target of approximately 17% FFO to debt in the latter part of our forecast horizon. In fact, we've continued to be proactive in addressing our equity needs, pricing an additional $1.2 billion of equity through forward sales under our at-the-market or ATM program since our last earnings call, leaving less than $4 billion of the incremental need remaining to be addressed through 2029.
These remaining equity needs are easily manageable for a company our size. Considering just in the last six months, we've addressed well over $3 billion of equity and equity equivalents through our ATM program, internal equity plans, and issuances of junior subordinated notes. As we've highlighted today, we continue to make great progress in solidifying our plan and remain increasingly encouraged about the strength of our long-term outlook and ultimately the potential to reassess the base for our 5 to 7% long-term EPS growth rate as early as 2027. And I'll turn the call back over to you, Chris.
Chris Womack: Thank you, David. As you can see, we are building for growth in the Southeast. Our vertically integrated markets with constructive regulation and transparent orderly regulatory processes are proving foundational to meet this predicted growth in a disciplined fashion that benefits the state in which we operate and the customers we are privileged to serve. This is an exciting time at Southern Company. We have accomplished a lot so far in February 2025, and our future has never looked brighter. Before we turn to questions, I'd like to highlight our commitment to investing in and developing our people at Southern Company.
We are where we are thanks to our dedicated leadership team and our thousands of customer-focused committed teammates across the enterprise. Collectively, they help each and every day to ensure we're making the right investments, running our business efficiently and effectively, and keeping customers at the center of everything we do. Sustained long-term success is a function of investing in our people and building a deeply talented bench. Our recently announced CFO transition, along with the other leadership announcements we've made in recent weeks, is a great example.
While we have Dan around for a period of time advising and helping with the smooth transition, I'm very pleased to have someone as experienced and talented as David stepping into the CFO role to continue with our mission to deliver regular, predictable, and sustainable results. I do want to congratulate Dan on an incredible career with Southern Company. And I want to thank him for everything he has done to support our company's success. For three decades, his counsel, his strategic advice, his leadership, and his friendship have been foundational in helping our teams seize the bright future ahead of us. One of the things I've always admired about Dan is his passion for developing our future leaders.
And that's a legacy he'll certainly leave behind. I'm honored to call Dan my respected friend. And while his presence will be greatly missed, we wish he and Chelsea the very best as he embarks on a well-deserved retirement. Operator, we're now ready to take questions.
Operator: Certainly. We'll now be conducting a question and answer session.
Carly Davenport: You may press 2 if you'd like to remove your question from the queue. One moment please while we poll for questions. Our first question is coming from Carly Davenport from Goldman Sachs. Your line is now live.
Chris Womack: Hey, Carly.
Carly Davenport: Hey, Chris. Thanks so much for taking the time. Just maybe to start on the capital plan update and the shift in the rate base growth to 8% from 7% through 2029. Just any shift potentially in the timeline as we think about the rebasing in 2027 or the views on the long-term growth rate there? And then just tactically, would you expect to give another full financial plan update on the fourth quarter call as well?
David Arcaro: Sure. Hey. Good afternoon. Thanks for your question. Let me take the second question first. And, yes, we will expect to continue with our normal cadence of doing annual updates, so we'll address all that in the fourth quarter. As it relates to the rate base growth and the timing, you know, we continue to be increasingly encouraged about what we're seeing in the marketplace, the momentum that we've seen with these large load customers is growing. And we're attracting many of them and having very good conversations about those. I think that we're gonna stick to the plan of sustainability over the long term. We need to see how this plays out.
We need to see it be in a sustainable pattern over the long term. And then we're gonna be revisiting that set point within the 5 to 7%.
Carly Davenport: Great. Thank you for that. And then just on the RFP update, some combined cycle capacity filed for certification there as part of the plan. Can you just refresh us on your procurement status in terms of turbines and also gas supply for those units, to come into service in 2029, 2030 time frame?
Chris Womack: Yeah. Carly, we have reservations. We made payments for the fees. And because of our size and activity that we've had for the past number of years, we have good relationships with OEMs and also the EPCs in terms of how this work will be carried out. So we feel real good about where we are and making sure that we're positioning ourselves to be very efficient but also making sure we have the ability to execute.
Carly Davenport: Great. Appreciate that. And, Dan, on your retirement, thanks so much for all the insights over the last couple of years.
David Arcaro: Yeah. Thank you, Carly.
Operator: Thank you. Next question is coming from Steve Fleishman from Wolfe Research. Your line is now live.
Chris Womack: Hey, Steve.
Steve Fleishman: Hey, Chris. Dan, man, you're leaving me one of the old ones here. But congrats, and, David, congrats to you as well.
David Arcaro: Thanks, David.
Steve Fleishman: A couple questions. First, just maybe I think on a couple of the prior Q and A calls you've talked about, the kind of rebase in 2027, maybe towards the top end of the 5 to 7% going back to, I don't know, 2025. And then kinda high end of 5 to 7% from there. Is that still what you're thinking? Or is that shifted a little bit?
David Arcaro: Yeah. I think where we've come out on that, and I think we've been pretty consistent. Dan's been pretty consistent with that in the last several calls about rethinking that base, upon which we set the 5 to 7% growth and, you know, as I mentioned earlier, as we see that momentum growing and we get a better line of sight, in a sustainable fashion, we'll recalibrate that and be within the 5 to 7% and work toward that. You know, it could happen as early as 2027, but there's a lot of variables at play, and we like what we're seeing at the moment. But we really don't see that happening before 2027. Yeah.
Steve, we are where we were. And I think as David described earlier, we're gaining better line of sight on the things that we were looking for. But we are where we are.
Steve Fleishman: Okay. And then on the FFO to debt improvement, could you maybe give us a sense of how kind of the year by year rough pace of getting to the 17%? Like, where do you expect to be in 2025, '26? And then when do you get to the 17?
David Arcaro: Well, we expect to get to approximately the 17 near the back end of the planning horizon. And with the capital that we see coming down the line, you know, that path is gonna be up and down a little bit. And the pace and the shape of that may change over time, but we're gonna continue to be very proactive and take advantage of opportunities as we see them as we grow into that 17% FFO to debt.
Steve Fleishman: Do you have a rough number where you are, like, right now? At the end of the quarter? Or do you have...
David Arcaro: Yeah. For the twelve months ended, Steven, I remember when we were talking about before, we kinda gave a here's the unadjusted number. Here's the number adjusted for Helene. Right now, we're in kind of 14.3, 14.4 unadjusted, more like 13 adjusted for the Helene. But I think what's important, and David hit this, is how proactive we're being with this equity plan. You know, we hinted, as we talked about this before, that increased capital could kind of change the shape of the trajectory for this path to 17%, and I think that's what you'll see play out.
But having the equity issued now kind of if you adjusted for the equity we've committed to, that's another 70 basis points or so on today's number. So we feel good about the progress and the commitment and how we're executing against that.
Steve Fleishman: Okay. Great. One last question. Just how much are you maybe looking also at asset sales? And I think there have been some stories out about PowerSecure on that regard. Could you just talk to asset sales?
Chris Womack: Steve, I know you wouldn't be disappointed if I said we're not gonna comment on any rumors or anything specific. You know? But as you know, we're always evaluating. I mean, if there's a better owner, and they're willing to pay, we'll be a great seller in those circumstances. But I think it'd be very premature for us to comment and speculate on anything that you may have heard or maybe considered talked about in the marketplace today.
Steve Fleishman: Okay. Understood. Thank you. Congrats again.
Chris Womack: Thanks, Steve. Thank you. Always good to hear from you.
Operator: Thank you. Next question is coming from Julien Dumoulin-Smith from Jefferies. Your line is now live.
Chris Womack: Hey, Julien.
Julien Dumoulin-Smith: Hey, Chris. Thank you very much. Appreciate it. Dan, David, truly a congratulations to both of you. Wish you the best of luck there, Dan. Thank you. Thanks very much. In your retirement. Absolutely. Guys, nicely done today, I gotta say. Just a couple details here. Can we talk firstly about load and the load update? I think you guys are gonna refine that here later this year. Can we talk about what you're seeing? You guys have been very diligent in providing commentary about the pipeline. We certainly heard that from peers so far with the earnings. How are you guys thinking, at least as it stands today, with respect to what you would anticipate, I think, in October?
And then related, I suppose you've got this further affirmation from the PSC on a couple more gigawatts, or I think that was the $4 billion number you guys threw out there as further potential in the commentary.
Chris Womack: Yeah. And on that number, I think we'll expect to hear from the commission later this year. I think, before the end of the year on that filing. As we, you know, as we've said, I mean, we still see that 50 gigawatt pipeline continuing to grow. And we continue to see just incredible amounts of activity. And as you see hyperscale capital budgets continuing to grow, I mean, we just keep seeing these huge numbers. We see corresponding activity. And so we're in conversations with all of the majors, all the hyperscalers. And having what I would call very advanced discussions. And so, you know, we still got work to do.
I mean, our focus is making sure we price them right, that there are benefits to existing customers. And so but I would say very optimistic about what the future holds. In these conversations and opportunities that we see available all across our electrics.
Julien Dumoulin-Smith: Got it. Okay. Fair enough. We shall see what happens this fall. And then maybe related here, as you think about that rate base versus earnings translation here, any other factors that you could point to here, especially as you think about it? And I heard your comments about repowering at Southern Power, but especially as you roll forward the plan here, any updated thoughts about where those contracts could land and or maybe on the pipeline side, any updates there as to opportunities in terms of size and scale? Again, I'm just thinking through the rate-based commentary here, and subsequent implications to earnings. Right? What are the other factors? On the nonregulated stuff?
David Arcaro: So, you know, the conversations that we're having with the large load customers are going well. Very interested in all of our service territories. Lot of attraction. Obviously, we talked a lot about Georgia, but Alabama and Mississippi having great conversations there as well. As we get more clarity to that, you know, like I mentioned earlier, we're gonna get to a place where we feel comfortable over the long term that momentum is sustainable, that's gonna bring us to a place where we see the possibility of being able to reset that anchor point if you will, within the 5 to 7%.
Now Julian, you also asked about Southern Power and some of those repowering projects that we've got going on there. You know, that is just that's a great company. And we've got a lot of opportunities that we're thinking about. In the marketplace with all that's going on with the large load customers. But, you know, as we see them, we evaluate them. You know, keep in mind, as we've talked about probably for years, that we do not get a get a hold of or get in front of ourselves. We don't put placeholders in our capital plan.
Whatever projects that we find that we want to go explore, they're gonna have to meet some pretty strict stringent risk return parameters that we follow and have historically followed. But one interesting thing to think about is you look into the next decade as we get into the early 2030s, there's several contracts that will come up for renewal at Southern Power. And what we see in the marketplace, there should be expect the possibility of some really good opportunities to reprice a lot of that capacity in the early part of the next decade.
Julien Dumoulin-Smith: Right. So maybe more ripe by the time you get to 2027 with that longer-term roll forward than the rebase.
David Arcaro: That's right. That's kind of the plan that we've been set on for a while.
Julien Dumoulin-Smith: Yeah. Absolutely. I'll leave it there, guys. All the best. Speak soon.
Operator: Awesome. Thank you. Next question today is coming from Nick Campanella from Barclays. Your line is now live.
Chris Womack: Hey, Nick. Hey, Nick.
Nick Campanella: Hey. Good afternoon. Thanks for all the updates. Congrats again on your retirement, and congrats to David. Looking forward to working with you. So hey. I just had a follow-up actually on Southern Power. You know, I was just wondering, you know, now that you're kinda committing more capital there, just how would you frame the returns compared to your core regulated business? And then, you know, I know it's just a much smaller part of the business, but just in a post-OBB world, how are you kinda framing the returns for, you know, contracted renewables? Thank you.
David Arcaro: Sure. Yeah. Great to hear from you. You know, we talked about we have a pretty stringent risk return parameter. We try to set these things up with long-term creditworthy counterparties. Try not to take fuel risk, and that usually plays out for us to be a little bit higher than our state-regulated returns historically. And we see these opportunities giving rise to perhaps expanding that in the future. But like I said, there's a thin needle to get through when we work through these things. The risk reward has to be right. The credit metrics have to be right for the counterparty. But we do explore opportunities all the time there.
Nick Campanella: Okay. No. Thank you. And, I guess in the IRP, you know, there were nuclear upgrades contemplated here. Just wondering where the conversation now kinda stands on new nuclear overall. Have those discussions picked up with the recent momentum we've seen in the industry? And the executive orders? Just I guess, you know, we've talked about this before, but where do you guys kinda stand now on your position on that? Thanks.
Chris Womack: Yeah, Nick. We've been very clear about the need for new nuclear in this country. And so talks with the administration, talk with hyperscalers, all across this country, we speak the virtues of the importance of new nuclear as we the success that we had with Bogota three and four in terms of bringing those two units online. I mean, I still think we've gotta complete the risk mitigation, the financial concerns that are there on the back end. We've gotta make sure there's financial certainty as those projects are pursued. And so we continue to have those kinds of conversations amongst ourselves but throughout the industry.
But we continue to believe that this country, to respond to the incredible demand we see, new nuclear has gotta be a part of the solution set going forward. And we'll continue to talk about it and continue to advance ideas to try to make it happen and to get it done.
Nick Campanella: Okay. Great. And just one last one if I could follow-up on Julian's question. But you still expect a large load update filing in August and would that be higher than kind of the 52 that we talked about in the past?
Chris Womack: Yes. Yeah. Yeah. I mean, we will give updates, and as we seek success and as we see these projects advance, we'll make sure that we have updates. We'll continue to keep you abreast of where we are and what's occurring in also letting you know what we see in the marketplace. We think the intelligence and market analysis about what's occurring as this market continues to advance, we'll continue to share.
David Arcaro: Yeah. Growing in the pipeline, Nick, but just remember, our disciplined approach is gonna risk adjust that and that's what you'll see us planning for and working with the commissioner. Yeah. And just to clarify, we'll make that filing in the mid-August time frame with the Georgia Public Service Commission, and then we'll follow on in September through the RFP and the certification process, that will provide an updated load forecast that will reflect what we see in the marketplace as well.
Nick Campanella: Alright. That's great. Always interesting to see those filings, so thank you. Appreciate it.
Operator: Thank you. Next question today is coming from Andrew Weisel from Scotiabank. Your line is now live.
Chris Womack: Hey, Andrew.
Andrew Weisel: Hi, everybody. Congrats to everyone echoing that sentiment. First question is on the gas plan. I see you're planning to build some new units by 2029 or 2030, but you're also planning to add combined cycle plans under PPA as early as 2028. How confident are you in those counterparties' ability to deliver on timing? It seems a little aggressive from an EPC and turbine delivery perspective. What assurances or protections do you have in place?
David Arcaro: Yeah. That's existing capacity, Andrew. So those are just the available capacity in the market. That's rolling off of a PPA that's serving some either already serving Georgia Power and expiring or serving someone else.
Andrew Weisel: Perfect. Okay. Great. And then the other question is, obviously, three years ago, you had an IRP, and then demand was so robust you needed to do the 2023 update. Now that the 2025 process is complete, how are you feeling about the outlook for demand and it's sticking for at least the next three years? Obviously, it's a moving target. I think you said you'll share a refreshed load growth target with us in six months. Maybe just high-level thoughts on how much buffer or excess reserve margin or just how are you thinking about it now that this year's process was settled?
David Arcaro: Sure. Yeah. Great question. I mean, if you look at the result of the 2025 IRP approval, we've got an incremental generation need that was acknowledged and agreed to in the stipulation and approved by the Public Service Commission. And then we're gonna be in this pattern of repeatedly updating what our large load pipeline looks like, that will at least in September, but perhaps more often, come with updates of our load forecast. And, you know, we've got this structure that is gonna exist at the Georgia Public Service Commission, that is orderly, is thoughtful, there's good deliberation of what is submitted, but it also has a degree of flexibility to it as well.
So, you know, we filed the 2025 IRP, but we are not at all precluded if circumstances warrant from doing an update to that as well.
Andrew Weisel: Okay. Sounds good. Nicely done. Now turning what was supposed to be a very noisy year into a pretty smooth one so far. Thank you very much.
David Arcaro: Thank you. Thanks, Andrew.
Operator: Thank you. Next question today is coming from Jeremy Tonet from JPMorgan. Your line is now live.
Jeremy Tonet: Hi. Good afternoon.
Chris Womack: How are you doing?
Jeremy Tonet: Good. Thanks. Congrats, Dan and David as well. And we will miss you. First, I want to start with Alabama, Mississippi a little bit here. You touched on the economic momentum there. And I was just wondering if you could speak to when these tailwinds could possibly translate into incremental investment opportunities there.
Chris Womack: I think it's gonna be very difficult to speak exactly when all that exactly shows up. I can just say to you that we're in the midst of advanced discussions on a number of projects. And so, I mean, there's work being done there. And so as it advances, we'll advise you and let you know, but good conversations, good activity. Good strong pipeline. I mean, we've talked about some of the economic projects. The Airbuses, and some others that have announced economic development expansions. I think we've spoken to some of those. But there's just a good, strong, solid pipeline of activity that's occurring there that I think is moving to some advanced discussions.
David Arcaro: Yeah. And some of that investment that you're asking about is already occurring. Certainly, you know, I think we spoke in a prior quarter about over a thousand megawatts of data center projects across those two states. There's transmission distribution investments that are already happening there. You've seen Alabama Power acquire and have other pending acquisitions on generation resources to serve their growing load. So it's happening. It's just it's been a little less front and center than all this stuff happening in Georgia lately.
Jeremy Tonet: Got it. Thank you for that. And then just want to pivot to the FERC gas pipeline expansion potential there. Just wondering what visibility you have there or what are the gating items left?
David Arcaro: So as a reminder, so this is largely our investments with Kinder Morgan. We have another investment that we co-own in North Georgia and as you can imagine, they are tied to a lot of the same things driving our utility investment. So it's around new combined cycle construction, it's around large load growth and just load growth overall in the area. It's not just our utilities. It's the coops. It's the munis being served as well. And so the upside potential is really a function of what will be built where ultimately to serve this large load.
Jeremy Tonet: Got it. Understood. Thank you for that. And then just the last one, if I could, as it relates to the equity needs there, just wondering, you know, thoughts on using forwards to kind of derisk the outlook there.
David Arcaro: Well, you know, it's really not appropriate to talk about specific structures or timing, but, you know, we've got a lot of flexibility. We've demonstrated that there's multiple tools, if you will, in the toolbox that we can implement, and I think we're gonna continue on that path and be proactive and take advantage of opportunities whenever they present themselves. To achieve the equity needs that we have over the horizon. And, you know, to your point, I think, technically, it may be worth pointing out that our ATM program really is a forward. I mean, we're locking in a price if you will, today for securities that we're transacting that will be delivered in the future.
So to your point, I think we are utilizing that flexibility.
Jeremy Tonet: Got it. Makes sense. Thank you. I'll leave it there.
Operator: Thank you. Our next question today is coming from Bill Apicelli from UBS. Your line is now live.
Bill Apicelli: Hey. Good afternoon. Thanks, Dan, for all the great work over the years. You'll be missed. Just to clarify on the question that Steve asked earlier around the financial guidance. So the outlook is to see where you shake out in the current 5 to 7% range. Right? And then rebase, you know, the 5 to 7% off of that number? That's the intention.
David Arcaro: Yeah. I wouldn't necessarily put a specific date on the calendar for that. I mean, it could be as early as 2027. But like I said, there's a long list of things that need to come to fruition. We need to see the continuing momentum solidify and be sustainable over the long period. So, you know, that could be 2027 when we rebase the set point within the 5 to 7% targets. But, you know, we're not gonna get ahead of ourselves there. We've gotta wait to see how these things that we see on the horizon come to fruition.
Bill Apicelli: Okay. Understood. And then just a question, you know, higher level around the trends on generation cost. Right? So we've seen the cost of combined cycles and peakers, obviously, you know, materially escalate over the last couple of years. I mean, in the conversations and in your own financial planning for some of this generation, you know, future needs, I mean, what are you baking in? Is the expectation that these costs are gonna continue to increase materially, or is there some, you know, as capacity comes on from the developers, manufacturers, is it gonna stabilize? I mean, what is your view in terms of how you plan for that?
David Arcaro: Yeah. I mean, you're kinda seeing the same things we're seeing out there in the marketplace. You're absolutely right that prices are going up, but we've got, you know, placeholders and reservation fees in there. And we're gonna react accordingly. And be prepared to be able to deliver the capacity that we need and the timelines that we've committed.
Chris Womack: But as you know, man, there's a lot of demand out there. And so there's a lot of upward pressure that we see in the marketplace.
Bill Apicelli: Okay. Alright. Great. That's it for me. Thank you.
Chris Womack: Thank you.
Operator: Thank you. Next question is coming from Anthony Crowdell from Mizuho Securities. Your line is now live.
Chris Womack: Hi, Anthony.
Anthony Crowdell: Hey. Good afternoon, everyone. Congrats, Dave, Dan. Congrats. Really appreciate all the time you gave us over the years. I just have, like, one follow-up. I think it's been thematic for the whole call, the questions. I'm just trying to balance out the conservative approach of management versus maybe the uncertainty that you guys maybe think about achieving a higher growth rate? Like, you have such firepower and CapEx in a big raise today, but like, hey, maybe not until 2027 at the earliest and still not looking to like anchor that in. I'm just curious if you could help us balance that out when we clearly understand you guys have always approached a conservative.
David Arcaro: Well, I think you hit it right there. You obviously do know us, and I appreciate that. You're absolutely right. We're gonna take this in a conservative manner. We're seeing the growth accelerating. Having great conversations with a lot of potential large load customers, and we see a lot of this come to fruition in the back half of the decade. So, you know, we've gotta see how this plays out. Also, keep in mind, we are a fairly big company, and it takes a lot to move us.
And so we need to see that momentum get to a place where it can carry us in a sustained way where it makes sense for us to change that long-term outlook.
Anthony Crowdell: Great. Thanks so much, Chris. I always thought of you as Paul Simon and Dan as the Art Garfunkel, so no worries going forward.
Chris Womack: Hey, Anthony. But we're still singing. We're still performing. The band is still together.
Operator: Thank you. Next question is coming from Andy Storozynski from Seaport Global. Andy, please go ahead.
Chris Womack: Hey, Andy.
Andy Storozynski: Thank you. How are you? So I'm just wondering. I mean, you clearly have this unique cost of capital advantage in the entire industry. That usually comes with, well, with more pressure than also premium growth prospects. You are sticking with your current range again, for the time being. But the other way is to create upside to earnings, you know, asset acquisition, corporate acquisitions. I mean, you know, there's you clearly have experience in developing generation assets. You know, some of your peers are starting to do what basically Southern Power has done in the past. So either expanding existing assets or building greenfield gas plans, again, using, you know, your skills.
So you're not going into any of this. Is it just because you are not planning to do it, or is it just because you don't want to sort of project the options that lie ahead?
David Arcaro: Oh, first hand, yeah, I think we should get you to come tell our story for us sometime too. That was terrific. But look. It's just our nature, and it kinda goes back to what Anthony said. We're not gonna get ahead of ourselves. We do have tremendous opportunities here. Yes. Southern Power remains an opportunity not only to recontract the existing fleet, but to potentially build new green or brownfield sites as all this growth is happening. But as part of our discipline in our outlook because we are a regulated utility holding company, we don't put placeholders in there for Southern Power. We're not a development company. Even though we are incredibly skilled at it.
It's just how we have approached this historically. It's how we're trying to approach this going forward. And I think David described it incredibly well. This is about us having the discipline to assess whether or not what we see is sustainable for the truly long term and not temporary in nature, which we don't believe it is, but we want to be sure. And as we are, you'll see us kind of acknowledge the incredible upside that we think exists in our Outlook.
Andy Storozynski: Okay. And then, you know, just the other thing is so we heard from some other, you know, vertically electric utilities. Right? They can name specific projects that are coming to their service territory, and those announcements are being made along with those utilities. In your case, I'm not complaining that there hasn't been enough activity on the data center side in Georgia or Mississippi. But fewer of those are sort of done along with your state utilities. Is it just a different business model? So or is it just a different pitch?
Again, I'm you know, it almost feels like it's, you know, it almost seems like those other utilities are getting more traction because they are being more they're linking some of the generation assets to those projects directly while you were just, you know, I guess, increasing the load for the entire system. I know if I'm myself correctly. Just that it seems like your announcements are less glitzy than those from others.
Chris Womack: No. You're not being I mean, I we get exactly what you're saying. And I think we're not promotional. And I think we're not getting ahead of ourselves until deals are done. And we're not talking about any non-binding conversation, not any non-binding agreements. I mean, we are we're working diligently through the processes and at the right time. We will make the appropriate announcements.
David Arcaro: Yeah. I think the biggest affirmation for us, Andy, is these processes we're going through with the regulators. They see what we see. And they are agreeing with the needs that we see to serve this growing dynamic, whether there's promotional announcements around individual customers or not, we're getting independent affirmation that this stuff is there and that there are benefits for existing customers it will support the kind of investment that you're seeing us make. Yeah. And just to add on to that, that's last point about the benefits to customers. You gotta keep in mind, these are incredibly complex contracts. Very large volumes, that we're working through.
And the paradigm that we've tried to establish in our service territories is entering into these contracts that will also provide benefits for all of our existing customers and protect those same customers. And so that takes a minute to get through those conversations and get to a good answer for everybody.
Andy Storozynski: Very good. Congrats, everybody. Thank you.
Chris Womack: Thank you. Thanks, Andy.
Operator: Thank you. We have reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.
Chris Womack: Again, let me thank everyone for being a part of our call today. Thank you for your questions. And we value and appreciate your interest in Southern Company. Thank you very much. And have a good rest of the day.
Operator: Thank you, sir. Ladies and gentlemen, this concludes the Company's second quarter 2025 earnings call. You may now disconnect.