Southern Company. 1st Quarter 2001 Earnings. March 31, 2001

Transcription

1 Southern Company 1st Quarter 2001 Earnings March 31, 2001 Contents Press Release 1 Business Outlook 4 Financial Highlights 7 Analysis of Reported Earnings 8 Factors Affecting Earnings 8 Electricity Business 9 Earnings From Operations 10

2 News April 26, 2001 Media Contact: Investor Relations Contact: Marc Rice Glen Kundert or Southern Company announces 27 percent increase in first quarter earnings per share ATLANTA Southern Company today said first quarter earnings from operations increased by 27 percent over the same period a year ago, boosted by the strong performance of its Mirant subsidiary and growing demand for electricity in the Southeast. Earnings from operations for the first quarter were $320 million, or 47 cents per share, compared with $237 million, or 37 cents per share, in the same period a year ago. The first quarter of 2001 is the last quarter in which Southern Company will have earnings contributions from Mirant, the global energy company that was spun off to Southern Company shareholders April 2. After non-recurring items, Southern Company s first quarter reported earnings were $320 million, or 47 cents a share, compared with $245 million, or 38 cents a share, in the first quarter a year ago. Following the spinoff of Mirant, Southern Company is focusing on three main businesses in the Southeast: its traditional regulated business in Alabama, Florida, Georgia and Mississippi; a growing competitive generation business in the eight-state Super Southeast region; and energy-related products and services for its retail customers. Excluding any contribution from Mirant, Southern Company exceeded analysts estimates with first quarter earnings from operations of $180 million, or 26 cents a share, compared with $151 million, or 23 cents a share, in the first three months of 2000.

3 We are on track to deliver on the financial, operating and customer service targets we have set for 2001, said Allen Franklin, Southern Company chairman, president and chief executive officer. Our success in meeting our commitments and executing the fundamentals will continue to distinguish Southern Company. Reviewing operations, Franklin said electricity use by retail customers in Southern Company s four-state service area increased 0.9 percent to 34.2 billion kilowatt-hours in the first quarter, compared with the first quarter of In-home electricity needs were up 8.6 percent to 10.7 billion kilowatt-hours. Electricity use by commercial customers offices, stores and other nonmanufacturing firms rose 5.1 percent to 10.7 billion kilowatt-hours. Industrial energy use declined 7.9 percent to 12.6 billion kilowatt-hours, mainly because of an overall slowdown in manufacturing activity that is occurring across the region. Total sales of electricity to Southern Company s customers in the Southeast, including sales to other utilities, increased 4.3 percent to 40.8 billion kilowatt-hours in the first quarter. In conjunction with this earnings announcement, Southern Company has posted on its Web site a package of detailed financial information on its first quarter performance. These materials are available at 7:30 a.m. EDT April 26 at Southern Company s financial analyst call will be at 2:30 p.m. EDT April 26, at which time Franklin and Chief Financial Officer Gale Klappa will discuss earnings and provide a general business update. Investors, media and the public may listen to a live Webcast of the call at A replay of the Webcast will be available at the site for 10 days. Southern Company (NYSE: SO) is a super-regional energy company with more than 32,000 megawatts of electric generating capacity in the Southeast. It is one of the largest producers of electricity in the U.S. Southern Company is the parent firm of Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Nuclear, Southern Company Energy Solutions, Southern LINC and Southern Telecom. Southern Company also owns a growing competitive generation business in the Southeast. Southern Company brands are synonymous with excellent customer service, high reliability and retail electric prices that are 15 percent below the national average. With more than 500,000 shareholders, Southern Company common stock is one of the most widely held stocks in the United States. Forward looking statements note Certain information contained in this release is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning Southern Company s ability to meet its financial, operating and customer service targets for Southern Company cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company; accordingly, there can be no assurance that such indicated results will be realized. The following factors, in addition to those discussed in Southern Company s Annual Report on Form 10-K for the year ended December 31, 2000, and subsequent securities filings, could cause results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations; current

4 and future litigation, including the EPA civil action against certain subsidiaries of Southern Company and the diversity litigation against certain subsidiaries of Southern Company; the effects, extent and timing of additional competition in the markets in which Southern Company s subsidiaries operate; the impact of fluctuations in commodity prices, interest rates and customer demand; state and federal rate regulation in the United States; the performance of projects undertaken by the non-traditional business and the success of efforts to invest in and develop new opportunities; internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries; the effects of, and changes in, economic conditions in the areas in which Southern Company s subsidiaries operate; financial market conditions and the results of financing efforts; the timing and acceptance of Southern Company s new product and service offerings; the ability of Southern Company to obtain additional generating capacity at competitive prices; and weather and other natural phenomena. # # #

5 Southern Company Business Outlook After the Spin-Off of Mirant Page 4 We will be focused on three major businesses: 1. Competitive generation We plan to complete more than 5,252 MW of additional competitive generation by 2004 to serve rapid demand growth in the super Southeast. The current construction schedule for competitive generation is as follows: MW MW ,700 MW ,536 MW Total 5,252 MW This is in addition to our existing wholesale business that generates about $100 million in net income for our operating companies today. 2. Products and services for energy consumers We will leverage our existing infrastructure and customer base to deliver additional products and services. Currently this includes Southern Company Energy Solutions, Southern Telecom, and Southern LINC. Examples of current products offered include energy services, outdoor lighting, and access to dark optical fiber. 3. Our regulated infrastructure businesses Transmission, distribution, and approximately 29,000 MW of regulated generation within our traditional operating companies. Annual Demand growth in our service territory expected to be 3 percent Strong customer growth of approximately 2 percent per year Goals for our Major Businesses 1. Double the earnings contribution from the company s competitive generation business in the southeast over the next five years. 2. Add significantly to the current base of four million retail customers. 3. Produce $50 million of annual earnings from new products and services within the next five years. 4. Continue to evaluate acquisitions that support the company s growth strategy. See caution regarding forward looking statements on page seven of this document

6 Page 5 Financial Goals for the Company 1. Earnings per Share Growth approximately 5% annual growth 2. Return of equity top quartile of electric utilities 3. Dividend Payout move to 75% gradually over time 4. Dividend Growth half of earnings per share consistent with our payout objectives 5. Capital Structure reach a minimum 38% equity ration by 2003 We are targeting strong earnings results in 2001 while maintaining our current annual dividend of $1.34 per share. Projected Earnings per Share Growth (Mirant excluded from all values) 2001 Competitive Generation 0.18 Products and Services 0.01 Regulated Infrastructure 1.48 Other* 0.04 Holding Company (0.11) Total $1.60 * Includes the leasing subsidiary previously managed at Mirant The distribution of these earnings in 2001 should be roughly 35-40% in the first half and 60-65% in the second half of the year Expected Sources and Uses of Funds from 2001 to 2004 All Values in Billions Sources Funds from Operations $10.3 Equity Issuances 0.7 Net Debt and Preferred 2.2 $13.2 Uses Investments $ 9.4 Common Dividends 3.8 $13.2 See caution regarding forward looking statements on page seven of this document

7 Forward-Looking Statement Disclosure Page 6 Note: All of the information contained in this Business Outlook is forwardlooking information based on current expectations and plans that involve risks and uncertainties. Although Southern Company believes that this forward-looking information is accurate, its business is dependent on various regulatory issues, general economic conditions and future trends, and these factors can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company. The following factors, in addition to those discussed in Southern Company s Annual Report on Form 10-K for the year ended December 31, 1999, and subsequent securities filings, could cause results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing such laws; current and future litigation, including the EPA civil action against Alabama Power, Georgia Power and potentially other subsidiaries of Southern Company and the diversity litigation against certain subsidiaries of Southern Company; the effects of increased competition in the markets in which Southern Company s subsidiaries operate; the impact of fluctuations in commodity prices, interest rates and customer demand; internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries; the effects of, and changes in, economic conditions in the areas in which Southern Company s subsidiaries operate; financial market conditions and the results of financing efforts; the timing and acceptance of Southern Company s new product and service offerings; the ability of Southern Company to obtain additional generating capacity at competitive prices; weather and other natural phenomena; unanticipated developments in the California power markets affecting Southern Energy and certain of its subsidiaries, including, but not limited to, unanticipated governmental intervention, deterioration in the financial condition of counterparties, default on receivables due, adverse results in current or future litigation and adverse changes in the tariffs of the California Power Exchange Corporation or the California Independent System Operator Corporation; and the ability of Southern Company to meet the conditions for the spin off of Southern Energy, which include regulatory and other approvals. See caution regarding forward looking statements on page seven of this document

8 Southern Company Financial Highlights (In Millions of Dollars Except Earnings Per Share) Page 7 Consolidated Earnings 3 Months Ended March (Note) (Note) Southern Company Excluding Mirant Retail $172 $158 Wholesale Total Electricity Business Products and Services (2) - Parent Company (24) (30) Other 7 5 Consolidated Net Income As Reported $180 $151 From Operations Basic and Diluted Earnings Per Share As Reported $0.26 $0.23 From Operations Southern Company Including Mirant Net Income As Reported From Operations Basic and Diluted Earnings Per Share As Reported $0.47 $0.38 From Operations Consolidated As Reported Operating Revenues $2,270 $2,052 Earnings Before Interest and Taxes Average Shares Outstanding(in millions) End of Period Shares Outstanding(in millions) Dividend Payout Ratio 63.5% 70.0% Return on Common Equity 14.4% 14.0% 3 Months Ended March Change Kilowatt-Hour Sales- Total Sales 40,810 39, % Total Retail Sales- 34,159 33, % Residential 10,679 9, % Commercial 10,671 10, % Industrial 12,570 13,648 (7.9)% Note Financial data reflects various non-operating items. See pages 10 and 11 for details. Certain prior year data has been reclassified to conform with current year presentation. Information contained in this report is subject to audit and adjustments and may be different from final results published in the Form 10Q.

9 Page 8 Southern Company Analysis of Reported Earnings (Note) (In Millions of Dollars) 3 Months Ended March Change ELECTRICITY BUSINESS: Retail Revenues $ 1,882 $ 1,783 $ 99 Wholesale Revenues Other Operating Revenues Total Revenues 2,221 2, Fuel and Purchase Power Non-fuel O & M Depreciation and Amortization Taxes Other Than Income Taxes Other Interest Charges and Dividends Income Taxes EARNINGS FROM ELECTRICITY $ 199 $ 176 $ 23 PRODUCT AND SERVICES (2) 0 (2) PARENT COMPANY (24) (30) 6 OTHER CONSOLIDATED EARNINGS (Note) $ 180 $ 151 $ 29 Southern Company Significant Factors Impacting EPS (Note) 3 Months Ended March Change Consolidated Earnings $ 0.26 $ 0.23 $ 0.03 Significant Factors: Retail Business 0.01 Wholesale Business 0.01 Parent Company 0.01 Total $ 0.03 Note: Information for all periods excludes Mirant.

10 Page 9 Electricity Business Financial Overview (In Millions of Dollars) 3 Months Ended March % Change Electricity Business Operating Revenues $2,221 $2, % Earnings Before Interest and Taxes % Net Income Available to Common % Alabama Power Operating Revenues $850 $ % Earnings Before Interest and Taxes % Net Income Available to Common % Georgia Power Operating Revenues $1,108 $ % Earnings Before Interest and Taxes % Net Income Available to Common % Gulf Power Operating Revenues $165 $ % Earnings Before Interest and Taxes % Net Income Available to Common % Mississippi Power Operating Revenues $171 $ % Earnings Before Interest and Taxes % Net Income Available to Common % Savannah Electric Operating Revenues $62 $ % Earnings Before Interest and Taxes % Net Income Available to Common 1 2 (10.2)%

11 Southern Company Earnings Per Share as Reported and from Operations (Note) Page 10 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year 2001 As Reported $ 0.26 $ - $ - $ - $ 0.26 Adjustments for: None From Operations $ 0.26 $ - $ - $ - $ As Reported $ 0.23 $ 0.39 $ 0.81 $ 0.09 $ 1.52 Adjustments for: Mobile Energy Write Down From Operations $ 0.23 $ 0.39 $ 0.82 $ 0.09 $ As Reported $ 0.21 $ 0.36 $ 0.68 $ 0.08 $ 1.33 Adjustments for: Mobile Energy Write Down From Operations $ 0.21 $ 0.36 $ 0.78 $ 0.08 $ 1.43 (Note) Excludes discontinued operations of Mirant.

12 Southern Company Earnings as Reported and from Operations (Note) Page 11 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year 2001 As Reported $ 180 $ - $ - $ - $ 180 Adjustments for: None From Operations $ 180 $ - $ - $ - $ As Reported $ 151 $ 256 $ 523 $ 64 $ 994 Adjustments for: Mobile Energy Write Down From Operations $ 151 $ 256 $ 529 $ 65 $ 1, As Reported $ 148 $ 248 $ 463 $ 56 $ 915 Adjustments for: Mobile Energy Write Down From Operations $ 148 $ 248 $ 531 $ 56 $ 983 (Note) Excludes discontinued operations of Mirant.