Ladies and gentlemen, good afternoon. My name is Frank and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company Fourth Quarter 2017 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. As a reminder, this conference is being recorded on Wednesday, February 21, 2018. Southern Company's Fourth Quarter Earnings Call will feature slides that are available on our Investor Relations website. You can access the slides at www.investor.southerncompany.com/webcast. I would now like to turn the call over to Mr. Aaron Abramovitz, Director of Investor Relations. Please go ahead, sir.

Thank you, Frank. Welcome to Southern Company's Fourth Quarter 2017 Earnings Call. Joining me this afternoon are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Art Beattie, Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call. The slides we will discuss during today's call may be reviewed on our Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Tom Fanning.

Good afternoon and thank you for joining us. As always, we appreciate your interest in Southern Company. As we report our 2017 results and look ahead to 2018 and beyond, our focus remains on investing in premier, state-regulated utilities and providing outstanding risk-adjusted returns for investors. Whether it's great customer satisfaction, high reliability, strong economies, constructive regulatory frameworks or credit quality, our portfolio of electric and gas utilities is a tremendous driver of value. Additionally, Southern Power's large national portfolio of long-term contracted renewable and natural gas assets and Power Secure, a small, but growing portfolio of distributed energy resources, continue to be great complements to our customer-focused business model. In 2017, we continue to provide the best customer service in the business. In fact, Southern Company and its four state regulated electric utilities continued to achieve the top five rankings on the Customer Value Benchmark Survey, while Nicor Gas and Virginia Natural Gas were named among the most trusted brands in their industry. Customers are at the center of everything we do and our utility franchises operate in some of the most constructive jurisdictions in the country as evidenced by rate outcomes at several of our electric and gas utilities. 2017 represented one of our strongest operational performance years in recent history. Our transmission team had its best year ever and our generation fleet performed exceptionally well. We also continued our track record of outstanding storm response during an active 2017 hurricane season. Let's turn now to Plant Vogtle 3 and 4. Over the course of 2017, Georgia Power and the plant's other co-owners successfully navigated the bankruptcy filing by the project's primary contractor, Westinghouse. Southern Nuclear, the licensee and eventual operator of the plant, successfully assumed control of the site and the Vogtle owners brought nuclear-experienced Bechtel, on…

Thank you, Tom. Good afternoon, everyone. As you can see from the materials released this morning, the adjusted results for the fourth quarter of 2017 exceeded our estimates, and for the full year of 2017, we earned at the top end of our guidance range on an adjusted basis. For the fourth quarter of 2017, we had reported earnings of $496 million or $0.49 per share, compared with $197 million or $0.20 per share in the fourth quarter of 2016. For the full year of 2017, reported earnings were $842 million or $0.84 per share compared with $2.45 billion or $2.57 per share in 2016. On an adjusted basis, for the fourth quarter, Southern Company earned $509 million or $0.51 per share compared with earnings of $295 million or $0.30 per share during the fourth quarter of 2016. For the full year of 2017, on an adjusted basis, which excludes the charges associated with the Kemper Project, along with the related AFUDC equity resulting from extending the schedule prior to the suspension of construction, charges associated with Plant Scherer Unit 3 as a part of Gulf Power's rate case settlement, wholesale gas services, acquisition and integration costs and the net impacts of federal tax reform legislation, Southern Company earned $3.02 billion or $3.02 per share, compared with earnings of $2.76 billion or $2.90 a share in 2016. A reconciliation of our as-reported and as-adjusted results is included in the materials we released this morning. The major earnings drivers for the full year of 2017 when compared to our $2.90 per share adjusted results for 2016 were the inclusion of a full year of Southern Company Gas, including our 50% interest in the Southern Natural Gas pipeline, retail revenue effects at our state-regulated electric utilities and an aggressive management of O&M…

Thanks, Art. As we look forward, we believe Southern Company is solidly positioned to deliver on its value proposition as our customer and community-focused business model continues to serve us well across our portfolio of companies. We have a transparent, well-balanced path forward to 4% to 6% EPS growth, which should also support our dividend objective. As we optimize the risk-return equation of our business, our strategies to preserve credit quality post-tax reform are intended to provide a solid foundation for value creation for both customers and investors alike. Thanks, once again, for joining us this afternoon. We'll now move to question-and-answer portion of the call. Operator, we are now ready to take questions.

Our first question comes from the line of Shar Pourreza with Guggenheim Partners. Please proceed.

Hello Shar.

Hey guy.

How are you?

Good. How are you?

Great.

So just two quick ones. First, on the $1.4 billion in equity per year that was disclosed today. How much should we think about being allocated to sort of increasing the equity layers at the various utilities? Or another way to ask is, do you sort of have an allocation in mind between the various states for modeling purposes?

Yes, about half.

Okay, about half?

Yes.

Okay, that's helpful. And then just on, lastly on the tax reform assumptions that's in your base assumption, what you're assuming as far as the plan to credit back to rate payers and is there any potential to spread out further in time redeploying to sort of near-term capital opportunities in order to get you that incremental investment opportunities to get you to the top end sort of, how are you thinking about this?

Yes. You know what's interesting about the incremental capital opportunities is we looked at the profile of our CapEx over time, I think you've probably heard this before, but we tend to be conservative in our projections. And one of the things that we have seen is that we budget really well for this year and pretty well for the next year and the year after, but starting in years four and five, because they can't see some of the CapEx opportunities, we tend to budget less and less. And so, it's very common for us to have kind of a downward-sloping CapEx projection. When we looked in history, in fact, we tend to fill those things in. So in effect, what we have thought about is essentially levelizing as a concept a CapEx appetite at the state companies. And that kind of incremental opportunity gets you more to the top of the range. Of course, we will manage O&M so that there are no price increases to customers as a result of that activity. And I think we got good capacity to do that.

Well, thanks so much guys. That's very helpful.

You bet. Thank you.

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

Hey, Jonathan.

Good afternoon, guys. Just curious on the dividend and sticking with that $0.08 when you have such a, kind of, significant incremental equity need. How did you sort of weigh that up here? Is it you're targeting a percentage growth because I know you've been at this $0.08 level for a while now? How should we think about where you want to be on payout eventually?

Yeah. So one of the things we're looking at, dividend policy is one of the ultimate signaling theories in finance, right? And when we look at our profile kind of over the next five years, it's clear that while our payout ratio may be in the 80% range for a period of time, once Vogtle clears to in-service, there is a sharp drop in our payout ratio. When we look at the viability of our ability to deliver on the growth objectives that we've outlined here, we think it's very advisable to stay the course on the dividends, regular, predictable, sustainable and live with, for a period of time, kind of an 80% payout ratio. Maybe a little north of that from year-to-year, because we believe once we emerge from the construction of Vogtle, we'll be back down in the 70s in a pretty healthy way. It's better to stay the course than it is to try and vary over a temporary period.

Okay. Thank you for that, Tom. And then just on slide 25, where you look at the growth with and without Vogtle. Just – it's certainly clear that the red 4% to 6% is starting off that midpoint of 2018, so...

Yes.

And your – effectively the gray lines are showing us where you would fall within that given the earnings at Vogtle in any particular year.

Yeah. You got it right, Jonathan. The starting point is 2018 and the gray lines do represent the nonlinear benefit of Vogtle over that next four-year timeframe or five-year, yeah, four years beyond 2018.

And I think it was important for us to point out kind of that fact, Jonathan. When you look at what Vogtle represents to our total earnings picture, it is only 6% of our projected EPS during this next four to five years. 94% of our earnings are going to still deliver 4% to 6%. So we would want to have that reflected in things like our P/E ratio and stock price performance.

Please just correct me, you're pretty much saying that the top end of the gray dotted lines that you would expect to still be within the 4% to 6% off of the 2018 guidance in all of those years. And so, I'm curious, so what's the purpose of the – without Vogtle? Because it seems a scenario where you just don't have the Vogtle earnings, but sort of everything else is fine, just seems to be odd for me to imagine.

I think we're just trying to point out the strength of the underlying business, excluding the earnings associated with Vogtle over the next few years.

Yeah. 90 – let me say it another way. 94% of our earnings are coming ex-Vogtle, and those are exceedingly strong and predictable over time. So all we're laying in is the notion that only 6% is associated with Vogtle during this construction period. Of course, once it goes in-service, it goes back to the earnings rate at Georgia Power.

Can I maybe just – go ahead.

Yeah. Go ahead.

You sounded like you have something to add, Tom.

No. Go ahead. It's all right.

Okay. I was just going to – do you have any update on the latest with the Chinese AP1000 and when that might start up and I'll leave it there?

That's right. Yeah. Sure. Westinghouse continues to say they're ready to load fuel what we believe the delay in Sanmen and Haiyang as additional regulatory review of the reactor coolant pump and the squid valves. Now we believe, Westinghouse believes, there's no issue there. This appears to be a technical regulatory oversight delay. But we believe, we don't know of any problem and once the regulator in China agrees to go forward, they'll load fuel. We see no impediments.

From what you just described, if there was an issue with that sort of feature, is that something that could be changed at the stage you're at or is that something that would be so endemic to the design that it would be hard to change?

Well, recall some years ago, there were some issues about the reactor coolant pump and there were changes made to the RCP. So that was done way back when I think everything conforms with our understanding of the engineering and ultimate operational performance. We think there's no issue. It's hard to speculate if there were a change required, what that would mean to constant schedule, I just wouldn't want to go there. But the clear understanding we have from Westinghouse, you know that we've had people on site for years now, is that there is no problem. This is a regulatory matter that the Chinese are dealing with.

So you still have people at that site kind of reporting back to you?

Yes. We do.

Okay. Great.

We sure do.

Thanks very much.

Yeah, you bet.

Thank you.

Our next question comes from the line of Greg Gordon with Evercore ISI. Please proceed.

Hello, Greg.

Hey, fellas. So when I'm looking at the guidance on FFO to debt, presumably the difference between 15% to 15.5% including Vogtle and the 16% to 16.5% excluding Vogtle is just, really relates to the earnings stream that you talk about on slide 24 where the clip above the $4.4 billion won't flip into cash flow until the plant's complete?

That's it.

I just want to make sure.

And we've run it by the – yeah and Greg, we've run this by the rating agencies and they think that this approach is sensible.

Okay. So assuming the plant comes in when it's supposed to come in, goes into rates, that closes the gap between those two numbers?

Yes, it does.

Great. In terms of the regulatory approaches you're making with the different states, and I guess I'm looking for a slide here; it is slide 13. You're taking the equity that you're raising and you're putting it into the following uses: higher regulated equity ratios, reduce parent debt, Vogtle CapEx, essentially. Can you take us – without burning up a ton of time, just take us through where you've already got sort of a plan in place; like in Florida, for instance, I think you've already got a deal on how you're going to use tax. What should we look for in terms of milestones and timing for understanding the outcomes on tax in Georgia, Mississippi and Alabama?

Yeah, Greg. This is Art. You're right. Gulf Power has filed a plan or a stipulated agreement with a couple of important interveners. I think the Office of Public Counsel and the Industrial Group there have signed on to the deal where there is an immediate, I believe, refund to customers of a lot of the unprotected deferred taxes, and it also provides for an increase in the equity ratios from 52.5% to 53.5%. And there are also some additional rate reductions that go into place for both their environmental rates and their base rates as well. So it's a comprehensive settlement, but it is a great example of what we're looking for in each of our jurisdictions. That will be different for every jurisdiction we talk about. Georgia, you mentioned, asked for some kind of input or filing last week and that has been postponed for another couple weeks. So there's still discussions going on there, but nothing to point to. Mississippi has filed an amended PEP filing there as well, and they have basically requested an increase in the equity ratio and provided for some mitigation of the rate increase that was initially filed there. That was about a 4% increase; that has now dropped to 2.5%. So that's another good example of what we are asking the regulator to do. It varies by jurisdictions. In the Gas business, we have a number of ongoing rate requests that will include the impacts of tax reform. I believe in Illinois, they're going to adjust tax reform based on the January order that they got out of the rate request they filed last year. So it just varies by jurisdictions. Some we may see this year, some we may see next year; so just stay tuned.

I'm sorry, did you mention Alabama, how you might go about this conversation in Alabama?

There's nothing that – there have been discussions ongoing, but nothing concrete to share at this point.

Fantastic. Thank you, guys.

Thank you.

Our next question comes from the line of Paul Fremont with Mizuho. Please proceed.

Hello, Paul.

Hey, how are you?

Terrific. Hope you're well.

Sort of a housekeeping question, I guess. When we do the numbers, it sort of looks like Southern Power came in a lot stronger than what you had initially been guiding to. I think you were looking sort of in the $0.30 – in the $0.40 range for them and for SONAT and it looks like it came in sort of north of $1, and it looks like the regulated pieces came in a little bit weaker. Are we reading that right, or are we missing some adjustments?

Are you talking for the quarter, Paul? Are you talking for the year?

For the year.

Yeah. Well, there are a lot of moving parts with Southern Power. They had a lot of new contracts; seven new solar and four new wind contracts where you got most of a full year's worth of benefit there, year-over-year. You had a lot of increase in depreciation there, but I guess one aspect that was not expected last year, and I'm assuming we're talking on an ex-item basis here, that was some state solar investment tax credits that we discovered we qualified for; that accounted for roughly a $0.04 pickup at Southern Power. So that, in my mind, is the only thing that was really boosting their numbers up this year. But year-over-year, I think the numbers were fairly close in terms of net income.

Okay. So maybe we just need to take it offline to see if we're missing some other adjustments.

Yeah, Paul, on Page 11 of the release, those are not ex items. Those are as-reported items so...

We try to just apply the adjustments that were broken out at the bottom of the page, but...

Okay. We can get back to you and get it right.

And then, I guess, with respect to infusing equity into the regulated operations, would that happen after you get some form of decision out of the regulators or should we start infusing equity even in advance of getting a regulatory response?

No. We will only invest equity when we have the authority to do so and earn on it appropriately.

Okay. And then, is there sort of a north limit on what you would ask for in terms of an equity ratio?

You mean a ceiling?

Yeah.

What we're solving for is to...

FFO to debt, yeah.

...get back to a FFO to debt percent. That's kind of the way we're doing it. And the beauty of this tax reform is, if you solve to an equity ratio, if that's the only thing you're doing. I said this on TV this morning, just broad numbers, I think we can preserve our financial integrity and still deliver in the range of 5% to 7% rate reductions, but that's if that's all you do. There could be a host of other things that could impact the regulatory treatment. But this is a win-win. There's plenty of room for us to preserve our financial integrity and deliver rate reductions.

Great. That's it from me. Thank you.

Thank you.

Thank you.

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

Hello, Julien.

Hey, good afternoon. Hey, howdy.

Howdy.

So on Southern Power, let me just pick up where you left off. Curious on what kind of growth you're seeing out of that business. I know you've talked about tax equity, et cetera, but through the forecast period, how much is that contributing given the updated forecast? And then maybe just a second on the back of that would be, what's the future of the company given what seems to be a little bit more of a modest growth profile or that subsidiary rather?

So I'm going to let Art fill in the blanks here. I'll give you the top line and that is certainly, we have seen a bit of a slowdown in the market. For 2018, we expect to earn somewhere in the $325 million range, but you're right. When you look at our overall plan, we are generally deemphasizing the contribution of Southern Power to our growth rate. You must remember though, one of the things that we put in place in the past is a joint development agreement, largely for wind with Res. So we're still pursuing all of that discretionary growth and we'll see how that turns out. With respect to the equity required for those growth opportunities, I think the kind of incremental equity will be minimal as they'll likely be funded with things like third-party tax equity and internally sourced funds. When you think about that, you should think about that contribution at Southern Power as one of the variables that could drive us upwards in the 4% to 6% range. Art, would you have anything to add there?

Julien, you are asking about where we're going to go and if you look at our 2018 expectations out of Southern Power, there's – not a lot of that growth is expected to be – or not a lot of that income is expected to be driven by new projects. Most of our joint development agreements, the opportunities there would probably begin delivering income in 2019.

That's right.

As we look year-over-year though, we'll certainly keep about the same level of production tax credits. We just put into – I guess we just signed an agreement on a new, small solar deal.

Solar deal, 20 megawatts.

Yes. And then we got our ongoing energy margins and our amortizations of ITC, which are, I think, year-over-year will be pretty close to the same, but we've also – are probably going to book in the first quarter some restructuring gains that will primarily be benefiting our – or optimizing our state apportionment rates across all the states that we have. And that will be a pickup of $0.04 or $0.05 of earnings at Southern Power. So when you look at year-over-year, we're going to be pretty close to the same level of net income as we were in 2017.

And I think the real point...

What about the state of the overall business if it isn't contributing meaningful amounts of growth? I mean obviously, that's a variable to be solved for, but how do you think about it in that context?

Well, we think that the state-regulated businesses, especially the way we've recast it, represents a lion's share of our growth opportunity. And in fact, when you think about kind of the equity needs, however we solve them, whether it's shares over programs or through investor friendlier kind of means, it represents I think 80% of the shares are going to be tied up in the state-regulated businesses. That provides the lion's share of growth going forward.

Right. In fact, actually, if you were to break it down, how much of the 4%, even at the bottom end, is driven by the state programs versus, call it, energy infrastructure versus gas?

Yes. That one is hard to break down. We've got so many moving parts in here, so.

What's interesting, we need to get back to you on that. But I'll tell you this, we have thought about this one. The net income profile of Southern Power isn't going to grow a whole lot over the future, but the earnings per share profile, we'll still deliver. In other words, because we're using tax-advantaged equity, while R will grow modestly, E won't grow hardly at all, and so we'll still deliver pretty good EPS, but the thrust is right and we'll get you the right percent and everything else between the two. The real lion's share of our EPS growth right now is in the state-regulated businesses.

Excellent. All right. Thank you, all.

Thank you.

Our next question comes from the line of Paul Ridzon with KeyBanc. Please proceed.

Hello Paul.

Tom, how are you?

Terrific. Hope you're well.

I am. Thank you. Quick question. You had some monetizations to raise equity. What would be a reasonable share count to use for 2018?

Hold on a second. Let's see, Paul. Our guidance range really assumes a range of possible outcomes. We said we have a $1.4 billion need. We certainly got a lot of tools at our disposal. The timing of that will be spread over the year. But as we've also said, we've got opportunities to do it in a shareholder-friendly way, which might mitigate that as well. So it's a hard question to answer and the range that we've given you is really the outcome of a number of different assumptions around all of the moving parts.

So I guess, one way to say it, Art, is kind of, at its most conservative, we can fully support this 4% to 6% growth rate and our credit metrics by using our internal plans and any at-the-market kind of effort. To the extent we do "investor-friendly means", means other than those shares, we could certainly improve within the range.

Yes.

So, I mean Art's right. It's hard to say. It depends on the success and the opportunity we see elsewhere in the market on some of these other ideas.

Okay. And then, on your slide deck, slide 16, you've got parent contributing a negative $0.47, what was that in 2017?

We'll have somebody looking for it and somebody will look for it. I just don't have it at my fingertips.

Okay. And then, just back to a previous question, you said look for net income at Southern Power to be essentially flat in 2018 versus 2017?

Yes. $3.25 million (45:57) would be my best guess; of course, it varies all over the place. Would be my guess.

Is Southern Power not going to see a pickup from tax reform?

Yes, they will be a beneficiary of that to the tune of $15 million to $20 million; but recall, also, that we are in the process of monetizing the 33% of the solar portfolio, which would coincidently kind of offset the benefit and the tax gain.

So the loss of that income.

In 2018, so that's right.

The benefit of tax reform equals the loss of income from the sale of solar. So the net effect is you keep income constant and you raise cash and offset shares.

Got it, got it. I'm good and if you could just find that number, you can just inject later on. Thank you.

Hold on, $0.31, okay.

What's the big driver there? I know that obviously the tax shield is a piece of that.

That's the biggest thing...

The debt has increased. So it's a full year effect of lot of the parent debt, right?

Got it. Okay, thank you.

Thank you.

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

Good afternoon. How are you doing?

Hey, Paul. Great. How are you?

All right. On slide 6, I'm sorry if I missed this, but the gas supply write-off of $0.10 for 2018.

Right.

What's causing that? I mean, could you just elaborate a little bit more on that? Is that sort of one-time in nature?

That was the amount of shares associated with replacing the hull, the credit quality hull from the write-off of the gasifier last year in 2017, at the ongoing carry and also the income loss associated with that.

I got you. So is the income loss associated with no longer having the gasifier...

Yeah. Right.

...regulatory speaking and the impact of issuing equity...

Not having an earning asset there. And I'm proud to say, these guys do more of the shows than I do, but even the shows I was at, I can remember drawing people a line that showed the 5% growth, which is the $0.15 and then the write-off and then $1.7 billion from Toshiba, this is stuff that we've had out there for some time. And this tax reform, this negative $0.06, we're going to work really hard to mitigate that. So I think we're going to be exactly kind of where we thought we might be, based on the talk we gave kind of at the balance of 2019, I mean, 2017.

Okay. And then, when we look at the slide nine, you mentioned that there's this business modernization that you're going to be doing some spending on, but O&M is supposed to be reducing or offsetting the revenue impact associated with that number. What I was wondering is, given the other sort of substantial CapEx that you guys are projecting at the regulated utilities, what we should think about the ongoing rate impact of that? Sort of, how do we think about the amount of capital that you're spending, that you're putting into these businesses and your ability to do the business modernization stuff that you outlined on slide nine, with the other non-business mod, non-Vogtle CapEx, if you follow me?

Yeah, you bet. If you want to look at a company that's done just a terrific job at this, I would go right to Georgia Power. They did a variety of things where they invested in technology and really took money out of the business, not only O&M, but some other investments like a lot of the local towns. But in that process, we've actually increased the reach to those customers, I want to say by a factor of 4. So it's interesting. Our customer base is getting used to more and more the use of technology in terms of managing our relationship with them. We still have important personal touch in the communities that we're privileged to serve, but I think Georgia Power has been a great example of taking O&M down and improving their CapEx potential. One other really important – and let me say this just another way, if I reverse that. The technology investments, that is the modernization efforts, in many ways, permit the ability to take O&M out. And if you think about Georgia Power during this time, they were named The Most Trusted Electric Utility in America. So we were all worried about what does this all mean to our relationship with customers and it remains really strong. One other concept. You guys know that I help lead for all the electric industry in America, whether it's IOUs, co-ops and munis, but the whole notion of providing appropriate levels of national security for this most critical part of our infrastructure is something that I'm very focused on. And I think this new word that starts to creep into, whether it's an infrastructure bill in Congress or in our dialogues around modernization goes not to reliability or potentially even service, but to the notion of resilience. That's going to become increasingly important as we think about protecting this most valuable asset.

Okay. But I guess what I'm wondering is, how should we think about the rates that – the rate increases that are associated with your CapEx and EPS growth? Do you follow what I'm saying? Just generally speaking, I'm not asking for huge granularity here.

Yeah.

But just generally speaking, how much do you think we can offset, right?

Something below inflation.

Yeah. That's what I would – and even our profile on nonfuel O&M will be to eliminate the inflation in the numbers and, again, to drive it below zero, if we can, to help fund these opportunities for mod capital.

And frankly, I think we have the capacity to do that. But if you wanted a number to use, it would be below an inflation rate.

Okay. And then, just finally on the sales growth, I noticed in the sort of appendix of the slides that you said flat to extremely modest, I think. Maybe I'm missing the term, but it sounded – I'm just wondering, just reiterate the sales growth that you guys are looking at in your service territory.

They are flat.

Yeah, if you get specific by class, it's probably a bit of growth in the industrial class and a bit slightly negative on the residential and commercial.

You know, the Southeast still is good, though. You think about it, we've had better than U.S. experience on population growth for both our gas and electric properties. And job growth is much better than the national average in terms of our electric properties. So you know what? I mean, what we're seeing in terms of flat is really a function, I think, of technology on behalf of customers. One other effect that we think may occur during this year is, as other companies – this is actually good for the economy, but as other companies now can expense their CapEx, we may see a lot more facility improvements, store restructurings, manufacturing, and that may have the effect of increasing the rate of investment of energy efficiency. That's why we believe, this year, it's flat.

Great. Thanks a lot guys.

Yeah.

You bet.

Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed.

Hello, Michael. Michael Lapides - Goldman Sachs & Co. LLC: Hey, guys. Hey, Tom. Hey, Art. Thank you for taking my question. I have two focus areas. First, when I look at slide 26, which has your CapEx by subsidiary on the regulated and at Southern Power, and if I compare it to the same slide in last year's guidance, so the fourth quarter 2016 five-year outlook, two things stand out. One is that the five-year capital plan for Alabama Power is up materially, $1.5 billion. And the other is that the five-year gas LDC spend is actually down from $6.7 billion to $6.1 billion, so $500 million or $600 million. Can you just talk about what the – what's happening on the capital side and what that money is being spent on in those two jurisdictions – or those two businesses?

Yeah, the gas one's easy. It's the sale of Elizabethtown is assumed. So you've lost Elizabethtown's CapEx; that's what that is.

And Alabama's increase is reflective of modernization capital; that was not in last year's numbers. Michael Lapides - Goldman Sachs & Co. LLC: Got it, okay. So lots of the incremental T&D in Alabama and when you file for rate recovery under annual rate recovery methodologies, you'll benefit and customers will benefit by having the rate reduction that's caused by tax reform and that gets partially offset by the incremental capital?

That's right. Michael Lapides - Goldman Sachs & Co. LLC: Okay. The other thing is...

Well, and of course... Michael Lapides - Goldman Sachs & Co. LLC: Go ahead. I'm sorry.

No, go ahead. Michael Lapides - Goldman Sachs & Co. LLC: My other question is it sounded like you're going to do the $1.4 billion or so of equity every year over the five years, but I'm just curious, when I look at the slide 26, CapEx comes down meaningfully after you're really $2 billion, meaning after 2019, meaning it's down almost $2 billion in 2020 over 2018, and almost $3 billion by 2022. Are you really – shouldn't you be in a position, if that's really what your capital budget is in the out years, that you're basically generating a lot of cash?

Yeah. Well, there's a couple effects in there. Recall, we talked about a variety of means to raise the equity, and what you're referring to is essentially a plan that still achieves 4% to 6% growth, but which uses kind of sales of shares through our plants, okay? To the extent we could do, say, more investor-friendly means of raising cash and equity, that certainly would be lumpier and maybe, potentially, more front-end-loaded and may reduce, frankly, the number of shares required. We'll just see.

And I think, Michael, as you look at Southern Power on that line, it basically reflects only the committed capital and maintenance capital to support existing assets or new projects that we've committed to. It would be incremental needs for beyond that and we've kind of set that out in a separate Southern Power slide. I believe it's in the appendix.

And the other thing that's going to impact timing, for sure, will be how the regulatory process has evolved at each of the companies. As I said earlier on this call, we're not going to invest equity until we have a regulatory construct that supports earning on it. So that also will have an influence as to how we send out the capital. Michael Lapides - Goldman Sachs & Co. LLC: Got it. Thank you, Tom. Thank you, Art. Much appreciated, guys.

Thank you.

Appreciate it.

Our next question comes from the line of Praful Mehta with Citigroup. Please proceed.

Hi, guys.

Good afternoon. Thanks for joining us.

Absolutely. Thank you for taking the question. So my question, actually, was on the regulatory construct you just talked about. Can you be a little bit more specific in terms of some of the variables that are at play? For example, there's the $7.3 billion deferred tax liability. Wanted to understand how is that – is that protected or unprotected, or how much is protected, unprotected? And what kind of timeframe are you working towards in terms of refund or are you offsetting against regulatory asset? Some color or context around that cash flow profile would be helpful.

Yeah, Praful. This is Art. Listen, I don't want to go state-by-state, because we're going to be getting ahead of the regulatory process a bit. It will vary by state. Some states have amounts of, say, storm damage cost, that is a reg. asset on their books. That might be something they themselves of to provide a temporary pickup in cash for recovery of that.

And deal with equity ratio later.

And then deal with equity ratios later. So there are all kinds of pieces. And if you take out all of the assets, right, that's the total of the protected and unprotected deferred tax assets would be, what, $7 billion, $8 billion? And about...

$7 billion.

And about $5.7 billion of that is protected and the remainder would be unprotected. And that's at a Southern level. So it's going to vary by operating company and I believe in the K, you can find a breakdown by each of the companies.

And the other thing that would probably be helpful in thinking about this, what we're solving for is this kind of preserving financial integrity. So that means getting back to appropriate FFO to debt levels. Without mitigations, tax reform would translate into approximately 2% to 3% impact at the states and maybe 3% to 4% at the Southern Company level, so that's kind of what we're solving for here. That may be helpful.

I got you. That is super-helpful. I appreciate that.

You bet.

And then secondly, just in terms of the Southern Power investment, you talked about $1.5 billion and you've not kind of shown in your plan, but you footnoted that there are scenarios under which you could have an incremental $1.5 billion in the out years in terms of Southern Power investment. Like what would be the variables that would trigger that potential incremental investment?

Greater than expected penetration on the res investments, for example.

The joint development agreement.

That's right. The wind deal that we've signed up that joint development for. And there could be a variety of other things. It comes with a transom. I mean, the whole point though is that is purely discretionary and our plan is that largely, we believe that would be funded through internal means or alternative sources of equity like tax equity, project finance or whatever. The clear message here is this 4% to 6% growth is being driven by investments and performance at our state-regulated entities.

Got you. I appreciate it. Thank you, guys.

Thank you, Praful.

You bet.

Our next question comes from the line of Stephen Byrd with Morgan Stanley. Please proceed.

Stephen, how are you? Stephen Calder Byrd - Morgan Stanley & Co. LLC: Oh, great. Good afternoon. Thanks so much for taking my question. I think my questions have been addressed. As I understand it, just on the impact to FFO and tax reform, just given that essentially you're in discussions with a variety of subsidiaries, your overall take is it's not the right time to try to give more detailed guidance in terms of the exact impact to FFO from tax reform just given how many variables are at play, am I understanding that right?

Yeah, basically. When it's done, it will be done and we'll tell you everything about it. I think we have outlined though the potential effects of tax reform and we've outlined kind of how we believe we're going about it. So it's some combination of unwinding our regulatory asset or liability or how we expect to restore our credit metrics through equity ratios, for example. So that's kind of the how, the what will show themselves when we reach agreement. But we, historically, we don't like to get in front of the states as they go through these sensitive discussions. Stephen Calder Byrd - Morgan Stanley & Co. LLC: Understood. That's all I had. Thank you.

Thank you.

We have a follow-up question from the line of Shar Pourreza with Guggenheim Partners. Please proceed.

Hello again.

Hey everyone, this is – hey, this is Eugene, actually, on for Shar.

Okay.

I apologize... (1:03:26)

Well, I think you kind of touched on it already with (1:03:34) saying you don't want to get in front of the state approval process, but I guess to the extent, a follow up to Shar's question about the equity going into the regulated utilities. To the extent you're asking for approval for higher equity ratios, could we also – could we assume that once that's approved, that you'd be earning on that, the higher equity ratio like a hypothetical capital structure as opposed to waiting for actual equity to be infused into the utilities?

Well, I think that's a great question and it's all going to revolve around the timing, the timing of the approvals and when the equity is funded or how quickly it's funded and that may occur over time as well, so.

But I think it will be our intention, you're asking a hypothetical. It would be our intention and it would be simultaneous. In other words, if we got the authority to increase in equity ratio, we would make sure that they had the capital that represented that equity in place.

Okay. That's fair.

And I think it goes back to somebody's earlier question that said, you're looking at $1.4 billion per year and we said that might be lumpy based on regulatory outcomes. That would be a reason why.

Okay. Got it. Understood. Thanks, guys.

Yeah, you bet. Thank you.

At this time, there are no further questions. Sir, are there any closing remarks?

Well, it's been an exciting time in the industry. I know – I think everybody has been wrestling with what does tax reform mean and it's quite a process. The net of it is, we think there's plenty of economics there to have a win-win agreement with all of our jurisdictions, that is that we can preserve our financial integrity and reduce rates to customers and we think that's good not only for our customers, for the company, but also for the growing economy. I think it's been a real shot in the arm to us all. The other thing I hope you'd take from this call is that as we've evaluated these opportunities, there's been a real redistribution of growth away from Southern Power. We're still committed to Southern Power. We still think there's opportunity and that provides upside to our forecast, but the real redistribution of growth in our focus really goes now to the regulated utilities that we have in some of the best jurisdictions in America. We think this is a plan that will be very promising and we will execute as well as we can and we'll update you as things develop. Thank you very much for being with us on this call. We appreciate your interest in Southern Company. See you soon.

Thank you, sir. Ladies and gentlemen, this does conclude The Southern Company Fourth Quarter 2017 Earnings Call. You may now disconnect. Have a great day, everyone.