The Southern Company
Analysis
Southern Company has become a growth utility: data-center and factory customers keep signing contracts faster than the company planned, and each deal is written to pay for the power plants built to serve it. The open question is whether the build gets paid for on time. How much of that 17 gigawatts is already drawing power?
- Signed large-load contracts keep beating the company's own plan.
Across the four calls the signed total more than doubled, to 17 gigawatts, and management raised its long-term sales forecast as those projects switch on. It is now a signed book of customers, not a projection. Which states are winning the next wave of data center contracts?
- Every new contract is written so the new customer pays its own way.
Minimum bills cover the full cost of serving each large load whether or not the power is used, on 25-year contracts backed by billions in collateral. That is why base rates can stay frozen in Georgia and Alabama.
- The spending lands years before the sales that pay for it.
The five-year capital plan is now $81 billion, up about 30% in a year, and free cash flow has gone negative. Equity needs keep shrinking, but stock is still being sold to fund work whose sales arrive late this decade. How much of that $81 billion is already committed to suppliers?
- Large loads ramp close to the schedule management assumed. Data-center usage is already climbing fast, so the sales that justify each new plant show up as that plant does.
- Base rates stay frozen while the new customers absorb the cost. Bills for existing homes and businesses stay flat, which keeps the regulators who approve the next plant onside.
- The amount of new stock Southern needs to sell keeps shrinking. Less new stock issued means today's owners keep more of the growth instead of sharing it with new shareholders.
- Customers push their power-on dates out. The plants and lines are already paid for, so profit grows more slowly than the money going out.
- The build costs more or takes longer than budgeted. Every extra dollar on steel, turbines and labor has to be earned back over decades, on rates set years earlier.
- Data center politics slow the pipeline down. County moratoriums or a hostile regulator would cut off the customer growth the plan and the rate freezes rest on.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$250K | Aug 21 | Oct 8 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Aug 10 | Oct 8 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Jul 23 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$250K | Jul 20 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$1K | Jun 12 | Aug 22 |
Congressional trading data provided by QuiverQuant
How The Southern Company turned $29.6B of revenue into $7.3B of operating income.
| Revenue | ||
|---|---|---|
| Southern Company Gas | $5.0B | ▲ 13.20% YoY |
| Gas Distribution Operations | $4.4B | ▲ 13.57% YoY |
| Gas Marketing Services | $582.0M | ▲ 12.79% YoY |
| Gas Pipeline Investments | $32.0M | ▲ 0.00% YoY |
| Total revenue | $29.6B | |
| Gross profit | $8.8B | 29.8% |
| Operating income | $7.3B | 24.7% |