Good morning, ladies and gentlemen. My name is Bridgette, and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company Third Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Please note as well, ladies and gentlemen, that today's conference is being recorded Wednesday, November 7, 2018. I would now like to turn the call over to Mr. Scott Gammill, Investor Relations Director. Please go ahead, sir.

Thank you, Bridgette. Good morning, and welcome to The Southern Company's third quarter 2018 earnings call. Joining me this morning are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Drew Evans, Chief Financial Officer. Let me remind you we'll be making forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements including those discussed in the Form 10-K, third quarter Form 10-Q, and subsequent filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to applicable GAAP measures are included in the financial information we released this morning as well as our slides for this conference call. The slides we will discuss today will be viewed on the Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Tom Fanning.

Good morning, and thank you for joining us today. As you can see from the materials we released this morning, we had a solid quarter. Our premier state-regulated electric and gas utilities as well as our competitive generation subsidiary, Southern Power, continued to perform well and we remain on track to deliver adjusted results that are well above our original expectations. While our financial performance this year is notable we are particularly proud of how our employees performed before, during and after the recent severe weather events. The resolve and professionalism of our employees has never been more evident than as demonstrated through recent restoration efforts in Alabama, Florida and Georgia, following Hurricane Michael. Hurricane Michael was the strongest hurricane ever to come ashore in Northwest Florida packing maximum sustained winds of 155 miles per hour, and a powerful 14-foot storm surge that left devastation across the panhandle of Florida. The destruction continued inland as Michael maintained Category 3 strength as it moved into Georgia and Alabama, another first-time event. Immediately following the storm, more than 600,000 customers were without power across our service territory. Storm restoration to customers of Alabama Power and Georgia Power was accomplished within three days of the storm. For Gulf Power, the effort included similar results for the service area which could be restored; however, much of their system around the Panama City area, had to be entirely rebuilt. This rebuild effort was accomplished within 13 days, some 30 hours ahead of the estimated time to complete. This extraordinary effort was not only a testament of the hard work and dedication of over 12,000 Southern Company personnel, but also included the critical contributions of over 35,000 personnel from 27 states and Canada who assisted with the restoration efforts. We owe these hardworking men and women…

Thanks, Tom, and good morning, everyone. The Mankato transaction Tom mentioned is another great example of our ability to efficiently source capital to mitigate our broader equity needs. We are also pleased to announce, consistent with previous investor communications, that we've executed the third-party tax equity financing arrangement for substantially all of Southern Power's existing wind portfolio. This transaction, which we expect to close before year-end 2018, provides $1.2 billion of total proceeds, while retaining our important ownership position in a premium carbon-free wind portfolio. The transaction is expected to be EPS accretive and would offset approximately $1 billion of equity needs for Southern Company. We also continued to work through the regulatory approval process at FERC for the sale of Gulf Power and Southern Power's plants Stanton and Oleander. While Gulf Power's most recent priority has been the restoration efforts in the wake of Hurricane Michael, we currently expect to close both transactions during the first quarter of 2019. As a reminder, our initial forecast of post-tax reform equity needs for 2018 through 2022 was approximately $7 billion. We have successfully reduced our projected equity need for this period by more than $4 billion through our proactive efforts to optimize equity sources. Additionally, we have already issued approximately $1 billion of equity through our internal and at-the-market programs through October of this year. Net of the incremental equity for Vogtle that we announced last quarter, our projected remaining equity needs from now through the end of 2022 are only $2.4 billion. We will continue to be thoughtful and strategic as we fulfill these needs. Now, for an update on third quarter earnings results. As you can see from the materials we released this morning, we've reported earnings for the third quarter of 2018 of $1.14 per share, compared with…

Thanks, Drew. As you can see from today's results, we continue to execute across our businesses and we're well-positioned to deliver on our goals for 2018 and beyond. We demonstrated the constructive nature of our state regulatory environments earlier this year as we delivered significant benefits to customers resulting from tax reform, while at the same time maintaining the credit metrics of our state-regulated businesses. For the incremental equity required to meet these plans, we executed in an outstanding manner through earnings accretive asset sales. Additionally, the economy within our service territories remains strong with in-migration and employment driving customer growth. As always, it is our customer-focused business model with emphasis on outstanding reliability, best-in-class customer service, and rates well below the national average that remains the cornerstone of our company and a key driver of long-term value to Southern Company's shareholders. Our commitment to delivering energy and energy solutions to customers includes conserving and protecting the environment for today and for future generations. This progress is evidenced by our successful reduction of greenhouse gas emissions by over 35% since 2007. We understand the importance of engaging with all of our stakeholders in a productive, transparent conversation about how we safely manage risk while delivering shareholder value and growth. Our goal of low- to no-carbon future will continue to inform our planning processes in the near future. We also continue to seek ways to improve our interim benchmarks as we progress towards our objective of a low- to no-carbon future. Southern Power also continues to execute on its plan to deploy capital into value-accretive, carbon-free renewable projects. The 150-megawatt Cactus Flats wind facility in Texas reached commercial operation in July of 2018. The output from this facility is fully contracted through long term purchase power agreements with General Mills and General Motors. Additionally, Southern Power recently announced a 200-megawatt Reading wind facility in Kansas with a 12-year power purchase agreement with Royal Caribbean Cruise Lines. Let's now move on to the mid-term elections. We watched last night's election results with much interest. No matter who is in office, we share a strong sense of purpose to our shared constituents all over the United States by providing clean, safe, reliable and affordable energy to the customers we're privileged to serve. We provide an unassailable advantage in a globally competitive worldwide economy. We remain focused on demonstrating superior performance across all our businesses. As we look ahead to our fourth quarter call in February, in addition to sharing our 2019 annual EPS guidance and an update on Vogtle 3 and 4, we will also update our five-year capital forecast, including expected ash pond closure costs and capital initiatives at our state-regulated utilities to improve service and lower operating costs. We certainly appreciate your continued interest in Southern Company and are now ready to take your questions. Operator? We'll now take the first question.

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

Hello, Greg.

Hey. Good morning. How are you?

Super.

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

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

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

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

Right.

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

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

Thank you, my friend.

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

Hey, Jonathan. Good morning.

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

Yeah, number of factors at play and one of the first things you should recognize is that the optimal staffing curve is always a little bit of a moving target. Witness the productivity increase that we got on-site, moving from pre-stand-down 80,000 hours a week. We've actually achieved 120,000 hours achieved the last week with actually fewer personnel. So, we're able to manage how much increased staffing we'll need by what our productivity assumption may be. Further, there's a whole host of other things at play. I think we mentioned this Helping Hands idea. A lot of what's going on right now involves setting up cable trays and pulling cable on-site. Ultimately, you have to connect that cable. One of the things we thought about is the original projections assume that electricians would handle most of that work. Through the Helping Hands initiative, we can re-segment the work so that other craft labor can participate in that activity. That obviously has an impact on how many electricians you will need. Ultimately, we do need more electricians on-site, and we have aggressive plans in place. We continue to work with Department of Labor. We continue to think about different ways to reduce absenteeism and attract new labor from around the region.

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

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

So, you need (27:22) up from where you are today as the rough number?

Oh, sure. Oh, sure. Yeah, and like I said, there's going to be a little bit of a moving target there, but that's right.

Okay. And just from memory, that's probably a similar deficit to what you were talking about last quarter. So, is that number very similar?

I would bet it's a wee bit less, but yeah, it's similar.

Okay.

Yeah. I wouldn't quibble about that.

And just final other thing. There was a number earlier in the year. I think it may have been the independent monitor's number that you needed to – at some point you need to get to 140,000 hours a week. And it's obviously good to see you getting within shot of that. But is that a number that was – is that your number? Or was that more staff number? And you got the right target?

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

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

Right.

And from what I'm hearing, that's probably the type of number we should focus on perhaps more than in our head count for example.

Yes, that's exactly right. So, here is the thing. We're very gratified with the improvement in productivity that allowed us with fewer people to increase our hours up to 120,000. I must say, and we push our people around a lot in our meetings, it's – I think the ability with that level of staffing to get more productivity starts to get a little limited. Our key to success in getting more margin now will be getting more people. You're right to focus on the numbers of hours, because that's ultimately what matters. Getting work done on the site. We do think we need more people on-site now.

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

That's right because all that matters is hours worked, right. I'm just saying at these productivity levels. At these productivity levels, we need more people.

Yeah.

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

You bet.

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

Hello, Steve. How are you?

Yeah, hi. Good morning.

Good morning.

Hey, Tom. Good. Thanks. So just one question just on the guidance. So, if you basically just take the $2.87 base that you've mentioned and grow it to 4% to 6%, in 2019 you'd be back to essentially what you're earning in 2018 at the high end. So is that mainly explained that the 2018 upside has mainly been the favorable weather? Or how should I think about that?

Yeah, Steve. I'd say that partially. So, if we compare weather, it's about $0.08 improvement relative to what our normal expectation would be, but I think the balance of your math is correct. A good portion of our benefit is still coming from productive state regulatory reform and usage and customer growth. And recall, when we went out with that original guidance, a lot of that was on the basis of 7 million shares associated with preserving the credit metrics with tax reform. What we've been able to do through these asset sales is essentially avoid now over 4 million shares, so the shares avoided certainly has a pickup in 2018 relative to what our original estimate was.

Okay.

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

Okay.

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

That's right.

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

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

Plus, a little bit of added retention for credit quality...

Yeah.

...related to a couple of branches.

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

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

And when you're – it's fully done, is it going to be about that $650 million or...?

The $580 million.

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

Oh, yeah, no, no, there's plenty of opportunities to do more. We try to be very judicious and strategic in how we exercise those things, but there's certainly more on the palette of opportunities.

Okay. Good. Thanks.

Thank you.

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

Hey, Michael. Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): Hi. Actually this is Khanh for Michael.

Okay. Great. Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): Thanks for taking our question.

You bet. Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): So just following on Steve's question there. You say there's a lot more opportunities there, but is there a level of earnings contribution from Southern Power that you target or that you'd be comfortable with going forward, given all the sale of Gulf Power?

Say it again I'm sorry, your question? Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): The level of earnings contribution from Southern Power to the overall EPS?

Southern. Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): Yeah.

Yeah, sure. Variety of things here. We have been in the low 300s for some time at Southern Power. As we think about the different – we've remixed so a lot of that earnings in the past, I don't know, two to three years was ITC related from solar, and so you've got these big pops. We've intentionally, and I think, we have some information in our slide material, transitioned from the kind of single year, people are shaking their heads at me on that on the slide material, but we've transitioned away from kind of the one-time pops to more the 10-year production tax credit, associated with wind. So here is kind of where we think Southern Power ends up, and that is earnings in kind of the low-200s, growing at 5% to 10% and we really think also that's a function of the market. When we saw tax reform occur, and we started hinting at this some last year, we really refocused growing a lot of earnings outside the state-regulated utility franchises, both electric and gas. And right now, what we see is when you think about Southern's earnings, something like 95% of Southern's earnings come from our state-regulated electric and gas franchises. That's where we think the best opportunity to grow the business is and we think it's a very attractive risk return proposition. Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): Yeah, that's great, thank you. Also, I'll follow up on a smaller topic, PowerSecure. At this point, do you have any thoughts or comments on Bloom's ability to execute on their projects and permits?

We're going to execute to – I'm going to comment on Bloom broadly. I'll say this. We've had a terrific relationship with Bloom and where we have deployed the Bloom technology along with our own proprietary storage and switch gear, we've had a terrific experience and the customers love it. More broadly, about PowerSecure. I think, I haven't seen the final numbers on Michael, but for Irma and a variety of these other storms, PowerSecure customers have been able to maintain operability during these worst of times at like a 98% availability level. It's been a terrific business and you know what I say frequently on the stump is, Southern has been such an iconic company for so long and we have such great franchises and such a great customer base. It is, however, I think this kind of inexorable change where, because technology enables it and because customers are requiring it, I think this old 100-year-old model of make, move and sell at a central station asset concentrated level may in fact start to dissipate over time. And that's why we did the acquisition of PowerSecure. And I think what also is notable, if you look at the recent business of Southern Power, we grew up on selling to IOUs and munis and co-ops, and lately we've been selling long term renewables to people like General Mills, General Motors and Carnival Cruise Lines. So what we're seeing is an intersection of interest particularly in the commercial and industrial sectors between what Southern Power is now doing and what PowerSecure is doing. Add to that our fuel management capabilities at places like Sequent, we think that we not only can play well but in fact influence how distributed infrastructure may occur in America. So it's very exciting. It's a very small bet. We've always said that, but it's a very exciting option bet that we've made. Khanh Nguyen - Credit Suisse Securities (USA) LLC (Broker): Okay. That's great. Thank you so much.

You bet.

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

Hey, Julien.

Hey. Good morning.

Good morning.

Well done thus far.

How about that?

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

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

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

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

Okay.

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

Hello, Anthony.

How are you doing, Tom? Good morning.

Awesome. Great.

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

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

Yeah, I think in this particular circumstance there, it's $0.10, but that nets from $0.22 worth of benefits. And so it is something – that is the functioning of how it will be forever.

Yeah.

Oh, great. And then you said there would be more of a primer on the two indexes you're using for Vogtle on slide 31. So, when you talk about an SPI of 1.02, does that mean you're getting 2% more hours done than what you planned? I'm just trying to understand how should I look at SPI and CPI.

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

So does that mean that you're ahead of schedule?

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

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

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

Great. Thanks for taking my questions, Tom.

You bet, buddy. See you.

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

Hello, Paul. Good morning.

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

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

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

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

Okay.

We try to couch all of our sales based on the equity reduction, knowing that the proceeds will be used for both purposes; repayment of debt and reduction of equity need.

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

Right.

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

That's correct. 16%.

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

About $0.08 in total.

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

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

So, that's no incremental capital gets you to the 5%?

Right. That's it.

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

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

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

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

Yeah, and it's really not just the balance of the year, it's everything.

Yeah.

Because we'll look at other investor-friendly options, et cetera. So, we'll balance all that together.

Great. Thank you very much.

You bet. Thank you.

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

Hello, Ali. Good morning.

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

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

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

No, it includes all of those effects.

Ali, the only thing I'd say is the Mankato sale is generally accretive to us.

Yes. It's about $0.01.

About a $0.01, so that's the other way to triangulate an answer to the first question you asked.

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

Yeah, I don't know whether you saw my little appearance on TV this morning. Look, the numbers we're showing this quarter are really at the tops of what we've been talking about for some years now, 1.4% growth quarter-over-quarter in retail sales, 2.4% in industrial, 1% growth in customers. Look these are all really good numbers. I would just throw a wee bit of caution on all that optimism. With my work at the Fed and everything else in our own analysis we do look at something that I call momentum numbers and I'm seeing momentum that looks kind of flat. That is you still may be positive quarter-over-quarter, but if you're less positive, I call that a negative. The momentum numbers would indicate that there is a bit of a pause in the economy and absent any positive action, we could see those numbers go back down a bit. What could unleash it? I think what we're seeing in the good numbers is the effect of tax reform and lower regulation and so people are investing in their businesses but they're doing it largely in their current sites, or expanding a current site. I think there is another wave but that wave is being suppressed right now through kind of long-term concern about the tax war, skirmish, whatever phrase you want to use. If we could resolve some of that uncertainty in the worldwide economic market, I think there is another breath to take on continued economic expansion, which would really help those numbers. That's kind of what I'm seeing right now. But boy if you look at our manufacturing numbers, for example, Drew, virtually all of them are positive.

Certainly, on the industrial side too, strong segments across all 10 segments.

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

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

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

But we're on hold on the ATM.

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

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

Right. And how much have we done so far?

This year?

Yes.

Three-quarters of that amount.

I've got you. Thank you very much.

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

Understood. Thank you so much.

Thank you.

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

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

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

It's probably fair to say that the results will vary by franchise, and we're in different states of maturity in each. But the goal really is to grind inflation ultimately out of the business in aggregate and see if we can't do more of that from the parent. And then, really it's an offset to a lot of the capital that needs to be invested into rate-base into the franchises.

And some of that sounds kind of ominous, but if you look at Georgia Power by reducing, kind of, capital in the field and investing in technology and this multiplication of points of presence, they were actually voted the Most Trusted Electric Utility in the United States last year. We can improve customer service and, at the same time, take cost out of the business. Andrew Weisel - Scotia Capital (USA), Inc.: Just to clarify on that, you talked on the last call about finding income-generating CapEx opportunities. Should we think of these as being a net increase or decrease to CapEx? And I know we'll get more details in the next call, but directionally, how does that net out?

It's an increase in CapEx. The objective will be take O&M down, increase CapEx, keeping rates constant, all other things being equal. Andrew Weisel - Scotia Capital (USA), Inc.: Got it. Okay. Then lastly, the 4% to 6%, what did that assume for O&M? Over the long term period...

It assumes a regular growth rate of, like 3%, but as Drew said, we're not going to be satisfied with growing O&M at 3%. We're going to grind it away to zero is what we're hoping for. Andrew Weisel - Scotia Capital (USA), Inc.: Got it. Okay. Thank you.

You bet.

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

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

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

You bet.

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

Praful, how are you?

Thank you so much. Hi, guys.

Hey.

So, maybe first touch on the way you're measuring EPS accretion as you talk about these different transactions. What is the baseline for that? Is it assuming a baseline with some equity issuances? Or just so I understand, what is the base against which EPS accretion is being measured?

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

Yeah, so, you lose net income, but you don't have the shares.

Don't have shares.

And if the sales price is beneficial, you get accretion.

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

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

It does. It does.

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

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

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

Understood. And so where does your current cash tax position stand? As in when do you expect to be cash taxpayers again given all these earning gains that you've had through these asset sales?

So, yeah, the numbers move over time but kind of 2023-2024.

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

We have been working with the Department of Labor to source labor from Canada. Yes, we have. But there are other ways to get that labor, too. And remember, this Helping Hands thing is a new strategy. I don't know. How long is it? Probably four-to-six-months old, something like that, but it's a way to re-segment the work so that we need fewer electricians and we can let other craft labor take big segments of work like pulling cable through cable trays. Ultimately, you have to connect the cable, so you need electricians. Plus, other ideas we have about sourcing through reducing attrition on the site, reducing absenteeism on the site and increasing productivity. We're very thoughtful of that a variety of ways. Even if we don't get labor from Canada, we may be able to source enough personnel to accomplish the work we need and get the margins we want. One other big factor we haven't spent a lot of time on; we continually work on the site with lessons learned from China and working with our prime contractor Bechtel to re-sequence work, optimize work processes and we've achieved much-better productivity that witnessed the latest numbers as a result of those good efforts. I personally call or we speak, Brendan Bechtel and I, once every two weeks or so. Steve Kuczynski, Head of our Nuclear Group is on-site all the time. We are working with the executives at Bechtel and Southern Nuclear to always optimize the workflow and we've been able to improve productivity as a result of that. That also goes to the need and timing of new personnel on-site, that's something else I alluded to but wasn't as direct as I am now.

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

You bet. Thank you.

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

Hello, Paul. How are you?

How is it going?

Terrific.

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

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

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

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

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

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

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

You bet. Thank you.

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

Hey, guys.

Hello. Kit, I hope you're well.

Yeah, everything's good. How about you?

It's fantastic.

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

So I think all good questions related to sales. Our retail sales growth year-to-date weather normalized is up about 1.1%. That's pretty broad based. If you look at residential, it's 0.8%, commercial is about 0.6% and industrial is up almost 2% year-to-date. If I look at weather in the year, about $0.05 of benefit occurred in the first half and about $0.03 of it occurred in this last quarter, it certainly was a very strong third quarter for generation. Customer usage is generally flat. That's maybe a little bit better than what we had initially anticipated. Efficiency will be a persistent trend and one that we certainly aren't here to buck, the efficiency of underlying equipment has improved materially from its original placement. And so we really will rely on in-migration into our state's good manufacturing and good industrial demand, and I think retail will plug right along but will be partially offset certainly by efficiency.

Hey, Drew. The other thing that we always kind of laugh at each other in the group I think is weather-adjusted number. So, we really do work hard at getting good numbers, but I'm always a little skeptical as to the weather adjustment. For example, in 2017, we had a hurricane, so we had to adjust out the effect of a hurricane year-over-year. Next year, we've had Hurricane Michael in the fourth quarter.

Yeah.

We're going to have to adjust all that out. These adjustments, we do the best we can. I'm always a little squeamish about them.

Fair enough.

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

That's great. Very helpful insight.

Well, thank you.

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

Hello, Charles. Good morning.

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

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

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

You bet.

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

Ashar, how are you?

Pretty good, Tom. Thanks. Can I just ask where are we with our equity ratios or expect to be by the end of the year versus what is authorized? And my second follow-up question is how should we use the proceeds? There're going to be like $6.6 billion of proceeds in the first half of 2019 that you're going to accrue from the sales. What would be the use of funds for those proceeds?

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

But can I just ask you like the $6.6 billion, right, so can we assume that you don't need equity next year because you'll be getting like $6.6 billion of proceeds coming in in the first six months of 2019? The rest is used for funding and debt reduction or how should I use that $6.6 billion?

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

Over the next five years.

Over the next five years.

And so we could be creative in how we do that, but we'll follow up with...

Well, that's what I was trying to get some color on that, is that do you need to issue equity next year, because you're getting so many proceeds in 2019?

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

So your triangulation there is going to get to a 16% FFO to debt.

Okay.

And that would imply some level of equity.

That's right.

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

Okay. Thank you so much.

You bet. Thank you.

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

Carl Seligson, be still my beating heart.

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

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

I don't know.

Hey, look...

Is there anything more coming down the line in your head if not actually on paper as far as asset transactions so that you can...

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

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

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

Oh, man, I hate that. It's always good catching up. Hey, I'm so appreciative of you joining us on the call. Really good hearing from you.

Thank you, my friend. Take care.

Yes, sir. Thank you.

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

Well, it's been quite a year. It's been a terrific quarter and I think as we've suggested, we've got a great foundation to continue to sustain this performance. Very gratified with our progress at Vogtle. We continue to work hard. We know there will always be challenges, but we appreciate your attention on today's call and look forward to chatting with you in the next week or so. See you soon. Thanks, everybody.

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