The Southern Company (SO) Q2 2021 Earnings Report, Transcript and Summary

Good afternoon. My name is Rita and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company Second Quarter 2021 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. [Operator Instructions] As a reminder, this conference is being recorded Thursday July, 29, 2021. I would now like to turn the call over to Mr. Scott Gammill, Investor Relations Director. Please go ahead, sir.

Thank you. Rita. Good afternoon and welcome to Southern Company's second quarter 2021 Earnings Call. Joining me today are Tom Fanning, Chairman and President and Chief Executive Officer of Southern Company; and Drew Evans, Chief Financial Officer. Let me remind you that we will 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 our Form 10-K, Form 10-Qs 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, which are both available on our Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Tom Fanning.

Thank you, Scott. Good afternoon and thank you all for joining us today. Drew and I will cover our usual business updates in a few moments, but first, let me provide an update on Vogtle Units 3 and 4. Unit 3 Hot Functional Testing is complete. Through the testing, we have validated the operation of critical primary and secondary systems at full temperature and pressure and demonstrated that the design basis is sound. The completion of Hot Functional testing marks the last major milestone before and represent a significant step towards placing Unit 3 in service. So, the duration of Hot Functional testing was longer than we originally anticipated, we remain committed to getting it right, for all aspects of the project. Taking into account the length of hot functional testing for Unit 3, the remaining activities for both units, and recent productivity trends, we now project placing Unit 3 in service during the second quarter of 2022 and Unit 4 in service during the first quarter of 2023. From a cost perspective, Georgia Power share of the total project capital cost forecast increased by $460 million, largely driven by our updated schedule, recent productivity trends and replenishment of contingency to fund expected future risks. As a result, Georgia Power recorded an after tax charge of $343 million during the second quarter. With Unit 3 Hot Functional testing complete, our next and final major milestone for Unit 3 is fuel load. We project fuel load to occur sometime near year-end 2021 or early in 2022. As we approach fuel load, our commitment to get it right remains our top priority. And as the operator of these units, safety is our paramount objective and we strive to meet first-time quality standards prior to significant testing and operations activity. We will not sacrifice those commitments to meet schedule or milestone dates. The scope and time required for the work remaining to prior to fuel load includes; one, completion of the nuclear fuel systems and the associated documentation, or paper, as I referred to it in the past; two, completion of remediation work and additional work identified during hot functional testing; three, completion of the work necessary to implement our plant support systems; and four, a reduction and productivity level consistent with recent site performance. Unit 3 ITAAC submittal and review process is ongoing and continues to follow our construction and testing activities on site. To-date, 208 ITAAC have been submitted to the NRC. We will submit the remaining 191 as we approach fuel load. Recently, the Nuclear Regulatory Commission conducted a special inspection of electrical quality issues that we had identified earlier this year, and the remediation efforts that are underway. The on-site inspection is complete and we expect the NRC's report to be published within a couple of months, though that exact timing will of course be determined by the NRC. Turning to Unit 4, direct construction is now approximately 84% complete and we achieved initial energization in May. Our revised construction productivity assumptions are consistent with recent trends. And as I mentioned, we now project an in-service date during the first quarter of 2023 for Unit 4. Our updated timeline for Unit 4 is reflective of several factors. First, Unit 4 experienced a slower than expected recovery from our COVID-19 related staffing reductions in early 2020. We call, at the time, the staffing reduction disproportionately impacted Unit 4 as we shifted our focus to Unit 3 critical path work fronts. We call, we reduced the density of personnel on the site and effectively move people from Unit 4 to Unit 3. Second, Unit 3 timeline, leading up to and during hot functional testing, delayed our plans to transition resources to Unit 4. More recently, we have staffed Unit 4 independently as work on Unit 3 continues. And third, over the past three months the growing economy and demand for skilled labor has impacted our ability to attract and retain electricians and, as a result, we experienced higher than expected attrition. Attaining the necessary levels of craft labor to meet construction milestones for Unit 4 has been more challenging than expected. In recent weeks, we have seen positive staffing trends, driven in part by offering the enhanced electrician compensation, which has helped to mitigate further schedule impact. Construction completion for Unit 4 has averaged 1.4% per month, since the start of this year. To achieve in November 2022 in service, we estimate Unit 4 would need to average 1.9% construction completion per month, and to support our first quarter 2023 in service, Unit 4 would need to average construction completion of approximately 1.3% per month for the rest of this year. Looking now at cost the $460 million pre-tax charge recorded during the second quarter reflects the schedule update for both units, including updated assumptions for construction activity and support resources, as well as replenishing the contingency for potential cost risks associated with completing both units. In conclusion, while the timing of Unit 3 Hot Functional Testing took longer than originally expected, I am encouraged by the success of the test. Even so, with completion of this enormous milestone, we still have a lot of important work ahead of us to get to fuel load. For Unit 4, we are focused on progressing through the next several milestones, while continuing to navigate through the COVID-19 pandemic and broader economic recovery efforts that have impacted productivity at both sites. As a company and a management team, we remain focused on bringing Vogtle Units 3 and 4 safely online to provide Georgia with a reliable, carbon free energy resource for the next 60 to 80 years. As always, I want to thank our employees, contractors, co-owners and community partners for their unwavering dedication to this important statewide project. Drew, I'll turn it over to you now for an update on the financial.

Thanks, Tom, and good afternoon everyone, I hope you all are well. First, I want to touch on the financial impacts of today's Vogtle update. We continue to be very committed to credit quality for both Georgia Power and Southern Company. Therefore, Southern Company will contribute capital down to Georgia Power to maintain its target capital structure and credit profile. We expect to fund the cash need at the parent company as it is incurred by reinstating new issuances under our internal equity plans, primarily the dividend reinvestment plan, which is expected to produce approximately $400 million over the next year. Importantly, with this financing strategy, we expect to maintain Southern Company's credit profile with consolidated credit metrics above current downgrade thresholds. This has a de minimis impact on earnings given our size, and we continue to see our long-term EPS growth rate in the 5% to 7% range and we are also reiterating our 2024 projected EPS range of $4 to $4.30. Turning now to earnings; we had strong performance in the second quarter of 2021 with adjusted earnings per share of $0.84, $0.06 higher than both last year's second quarter and our estimate. Recall in the second quarter of last year we were experiencing the peak impacts of the COVID-19 pandemic on our kilowatt-hour sales. This peak was primarily related to shelter and place mandates and working remote. And in response, we implemented significant cost savings initiatives. Therefore, it is no surprise that the primary drivers of our quarterly earnings this year, as compared to last year, we increased customer usage at our state regulated utilities, coupled with strong customer growth in the Southeast, as well as constructive state regulatory actions. As you would expect with rising kilowatt hour sales versus last year, our non-fuel O&M was higher due to increased maintenance and planned outages at our generating units. Weather impacts for the quarter were negligible year-over-year. When looking at adjusted EPS, as compared to our estimates for the quarter, the main drivers of the increased earnings were customer growth, that remains higher than our expectation, new connects are exceeding forecast by 25% and continued expense discipline. Year-to-date through June 2021, adjusted EPS is higher by $0.26 compared to the first six months of last year. Drivers are similar to those for the second quarter; increased usage, stronger customer growth, constructive state regulatory actions and are partially offset by higher non-fuel O&M. Year-to-date weather impacts were $0.08 favorable compared to the prior year and $0.05 unfavorable as compared to normal. A detailed reconciliation of these reported in adjusted quarterly and year-to-date results, as compared to 2020, are included in today's release and the earnings package. Turning to the economies in our service territory, we continue to see significant improvement from the lows we are experiencing at this time last year related to the pandemic. In the second quarter, weather normal retail sales in aggregate were up by 6% compared to last year, with commercial and industrial segments saw sharply and modest declines in residential sales. We have been analyzing retail sales compared to pre-COVID levels to assess recovery relative to historical norms. An early data indicate that in aggregate, our retail sales, have recovered to between 97% and 98% of 2019 pre-pandemic levels. Sales in the residential segment remained elevated due to continued hybrid working, while industrial and commercial sales remain slightly below the 2019 comparable; something like 97% of the 2019 level. In the Industrial segment, we are seeing strong momentum across nearly all sub-segments, commercial sales are also improving though sales may take longer to reach historical norms. As the COVID-19 delta variant becomes more widespread in the service territories, we will closely monitor for any signs of change, but have yet to see any material impacts. Underpinning these positive sales trends as a strong labor market evidenced by shrinking unemployment rates that are below 4% in both Georgia and Alabama. In addition, customer growth remains robust with new connects significantly outpacing our expectations across the electric utilities, reflecting construction new homes, as well as new commercial businesses and continued in net migration. Economic development continues to be very active in the Southeast. In Georgia alone there are over 200 active projects with the potential to bring over 30,000 jobs in the coming years. Capital investment and job announcements are far outpacing what we experienced even before the pandemic. These are positive signals for continued improvement of both customer growth and sales. With our solid adjusted results for the first half of the year, we are well positioned as we head into the peak electric load season. Our estimate for the third quarter of 2021 is $1.22 per share on an adjusted basis and consistent with historical practice, we will address earnings for the year relative to this EPS guidance after the third quarter. With that, Tom, I'll turn it back to you.

Thanks, Drew. We understand that global news often dominates our earnings calls, but I think it's important that we also focus on the terrific performance we see across our businesses. As Drew highlighted, our adjusted financial results of the first half are outstanding, and operationally, we are performing well. We have already endured a tropical storm in Georgia earlier this summer and our system has demonstrated resilience during the extreme temperatures experienced throughout this week in the Southeast. I would like to mention one more topic before we take your questions. Five years ago this month, we closed on our acquisition of AGL Resources, now known as Southern Company Gas. Our objective with the transaction was to deliver even greater customer shareholder value by continuing to invest in high quality predominantly state regulated utility assets, and we have done just that. We bolstered investment at the regulated gas utilities, continued to strengthen the position of our Retail Natural Gas franchise in Georgia, and divested non-regulated asset. Over the past five years. Southern Company Gas has; one, increased its JD Power customer satisfaction scores; two, increased its regulated business mix to 90%; three, increased its authorized equity ratios to 55%; four, increased our annual growth in rate base by 14% - by an average of 14% annually; Fifth, raised $3 billion from the sale of non-strategic assets, some at all-time high PE multiples and reduced risk by selling assets like the Atlantic Coast Pipeline and the Sequent Asset Management business; and then seventh, all while increasing opportunities for talented leaders to take on new and important roles across the Southern Company enterprise. A great example to that is sitting right next to me, Drew Evans, our Chief Financial Officer is doing a terrific job. And his breadth of experience and engaging thought process has helped us all. In summary, the acquisition has far exceeded our own expectations. The positive result of our gas business are indicative of the approach we take across all of our businesses and to the nine million customers and communities we are privileged to serve. This approach best positions our state regulated utility-centric business model for the future as we seek to maximize our return to shareholders on a risk adjusted basis. Once again, I want to thank everyone for being with us this afternoon. Operator, we'll go ahead and open the floor for question.

Thank you. [Operator Instructions] Our first question comes from the line of Julien Dumoulin-Smith from Bank of America. Please proceed with your question.

Hey, Julien, how are you?

Hey, this is actually Cody Clark on for Julien. How are you?

Oh, okay. Great, fantastic.

So, maybe first, if we can talk about Hot Functional testing. I'm wondering how you're thinking about the post-test analysis that you're kind of working through right now, you took temperature back down to [indiscernible]. And I'm wondering, this year, assuming that you have all the data now that you can kind of proceed, is there still the potential risk for additional remediation work there?

So, let me call a couple of things out that's interesting, I think. Number one is, everything is progressing right now as we said it would. In other words, now that we've completed HFT effectively, we take the car, and lift the hood, and look at the engine, and see what happened. The experience in China showed that there shouldn't be any big things happen. That's our experience in China. But certainly, that's an important part of work. The other thing I just want to point out because I know this has been a topic on prior calls, just want to raise this. If you recall, I want to say it was the first unit that went through HFT in China, actually had to re-perform their HFT. So they had significant operational issues concerning vibrations and a variety of other things. And that took over six months. We have passed through those issues, we learn from them, and for the issues they experienced, our plant worked great. So, we are as we thought we would be. And of course, between now and fuel load, as we called out in the script, there is certainly four big areas we do have to work on. I love page five, I think slide five, on the information we've given you guys this morning, you see Vogtle Unit 3, Cooling Tower actually has water vapor coming out of it. That was such a wonderful site to see. I was on site, frankly, when that was going on. But look, it was heated with affluent heat from the reactor coolant pumps, who performed beautifully during the test. Now we're going to heat it with nuclear fuel. So, we got to put all the systems necessary to get nuclear fuel in there and use that as the heat source. Secondly, as we went through the process of starting HFT, and then through HFT, we found some things we can do better to improve the long-term operation of the plant. We will do those things. And then, I called this out on the last call. We call them plant support systems, but this is essentially balance of plant activities HVAC portable water some signage, things like that that are necessary to support an operating workforce at the plant goes live. And then finally, we made an adjustment, we reduced actually our estimate of productivity of the workforce on site to more closely match our recent experience but that's what's left to get to fuel load. All of these things represent a significant effort, but I will say that the biggest risk was getting the HFT and completing HFT in an excellent manner, and we did that.

Got it, understood. Thank you for that.

And to be specific, one more thing, we have seen no data so far that gives us any concern, if that was part of your question.

Got it. No, that's helpful. That's helpful. So, can you give us a little bit more color on attrition at the site, and I know that was brought up and some of the stat, in PCM testimony [ph]; what are you assuming in the new schedule and especially considering the enhanced pay that you mentioned?

Yes. So, we went through a period there. So we were really focused on getting HFT, getting into it, and going through it, and all that. And so, we weren't planning on doing a lot. Further, some of the quality issues we recognized - we want to make sure that we fully understood the scope of everything that we were finding so that we didn't repeat those mistakes on Unit 4, which I think we've done. At one point, during our meetings with co-owners, and the NRC, and the PSC staff, and Dr. Jacobs, and everybody that we deal with, we were seeing greater than expected attrition. And we really lay that out to, I think, the improving economy in the Southeast, but really big data centers that were attracting electricians. So, we exited two stages of compensation increases that really arrested that. So, I want to say, one week we hired 25 electricians and we lost like 72. And when we saw that, we were going, oh man, we've got to fix that. And I think now we have. Recent experience would say that since the adjustment in June - so, this would be, maybe four weeks of activity, we net added now, so these are net adds, 350 people. So, we have about a 1000 now and we'd like to get to 1200. So, there is still some hiring activity going forward for Unit 4 but we feel good about our ability to do that. And the other important point here is Unit 4 now is on an independent track from Unit 3. Okay? And we used to - and in fact, in prior earnings calls, we talked about, oh, an optimal relationship is nine months and 12 months. We have stopped the idea. It no longer is applicable to think about the track for Unit 3. Unit 4 is now on an independent path from Unit 3.

Got it. And then, just one more if I can.

Yes, sure.

Just wondering what the impact of the of the delta variant is on staff and if you're assuming any impacts from this in the current schedule?

Yes, absolutely. So, what we have been - we went through a period where there was just a handful of positive tests and they are up a little bit. Let's see, I guess our - we've had something like - since the start of the pandemic, something like 2600 people impacted. Right now, we have somewhere around 65. Okay? That would be our latest data. That's an increase. Probably a week or two ago, it was 25. About a week before that, it might have been 10. So yes, it is picking up. The other thing we're seeing is that, for those that are impacted, the severity of the illness associated with the virus, has been less significant. One other thing I do want to say, I don't think we have a slide here that shows the progression of HFT, It took us a while to get to full temperature, full pressure, but once we got there, the plant is running like a champion. It really has been stable. So, lots of little things along the way, we fixed them, and once we got there, it's been very stable.

Okay, that's great. Thank you for taking my questions. I'll jump back in the queue.

Thank you for joining us. Appreciate it.

Thank you. Our next question comes from the line of Jeremy Tonet from JPMorgan. Please proceed with your question.

Hey, Jeremy. How are you?

Hi, good afternoon. It's actually Ryan on for Jeremy.

Okay.

I guess, just wanted to ask one on any expectations that you kind of have heading into this kind of NRC kind of report. And then, they're very explicit about the Unit 4 timeline, but if there is any kind of - any kind of baked in there for Unit 4 regarding what might come out of that report, any kind of additional remediation or adjustments that might be required?

Yes. But I mean, this doesn't go necessary to the NRC report but rather it goes to - it really was involved and the time it took to get to HFT and the remediation plans we put in place to satisfy the quality issues we saw in the paper. And remember paper. It's shorthand for turning over from construction to system testing, to documentation necessary of the nuclear quality, necessary to submit an ITAC. Okay? So, when I say paper, it's actually a big deal. And I've said that in the past three or four call, what a big deal it was. And it has been a big deal. So, we put in processors in place to improve that effort. And our new schedule does include the effect of those processes, okay. The only other thing I want to say about the NRC is; this is their report, and it's in their hands. So, I certainly - as I wouldn't speak for a state regulator in any of our jurisdictions. I'm not going to speak to the NRC. I will say, as we have been completely transparent in all of our site meeting with all the co-owners, all, everybody there, the NRC is fully aware of what we found, and they are fully aware of our remediation practices. And that's about all I want to say about that. Let the NRC speak for themselves beyond that.

No, understood. Totally understand. And then, I guess, you guys mentioned the kind of the internal equity programs as a combination - I just kind of want to get a sense on the timing there. It sounds like, just over the next year - with the $40 million [ph] in trip or what kind of - maybe take longer, as kind of plan to potentially come online? Just got to make sure I have understood the message there.

Yes. Maybe I can give you a couple of sort of boundaries on this. Understand that what we'll experience or what we just reported in terms of increased costs, we won't actually experience until we start to move later into construction. So, these are incremental to budgets that really begin sometime next April. The sum total of those things, led to the write-down that we report today of $343 million. We are incredibly focused on credit and felt like there was a necessity to fulfill commitments that we've made to the rating agencies related to our coverage ratios in particular. And so the simplest thing for us to do is to turn on the DRIP plan, whether that's temporary or permanent, we'll just sort of monitors as we continue to monitor construction. The intent is for it to be quite temporary. But a single year of that program generates about $400 million, which I think, what we've just described to you as a debit it created by this expectation that's only three quarters of what we could issue under those plans in a particular year. But I would say that our single biggest purpose for this is that we have made commitments to rating agencies and to bondholders to maintain credit through construction and that is our singular intent.

And I think you said it in the script too, Drew, that we stick to the plan. The financial plans we put in place, the guidance that we did forward, the 5% to 10% range, 4 to 4.30. The impact of turning on for some time, the DRIP, is de minimis.

Understood. Appreciate the color. I'll leave it there.

Thank you.

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

Hey, Mike. How are you?

I'm well, Tom. Thank you, Tom and Drew, for taking my questions as always. One on Vogtle, and really one on Georgia. And specifically, in Georgia, how do you envision two regulatory processes playing from here? First of all, the timeline for kind of how you think about getting Vogtle 3 and the rates and kind of really the proceeding for that or the docket for that? And then, the second question is with Vogtle moving around in schedule a little bit, how you think about the rate case that you're supposed to file next year and whether you will just kind of push that off and trying and do all of this in one big docket?

Yes. So, to my admonition before, we certainly will not front run anything with the regulators or really kind of the plans that we have. I mean you, Michael, you know, you've been around forever and you follow us and do a great job with that. We've already laid out a framework to address cost recovery and prudence, and in fact, the Unit 3 rate proceeding right before the Commission is currently one of those early steps. So, let's leave it there. There is a whole lot of moving pieces in the constructive way, really, since I was involved in putting in place an accounting order methodology back in 1995, we've been able to manage really complex situations in a constructive way. And my sense is, with all the moving pieces here, we have a tough regulator, but I think they'll do a fair constructive job with it as we move forward.

Got it. And then, a question about the jurisdiction no one ever talks about, no one ever asks, but obviously one of the better places to be a utility. How are you thinking about Alabama in terms of how continued change in the generation fleet may play out, as well as kind of how the pace of grid investment may change over the next three to five years?

So, great investments is an interesting question. And that's a much bigger than Alabama question, right? When we look at California and we look at URI, and we look at the dysfunction in the so-called operating - the so-called organized markets, it is very clear that all of our jurisdictions, Mississippi, Alabama, Georgia, have a very well founded and orderly way of evaluating a transition to a generating fleet and the integration, importantly, of transmission into the overall integrated resource plan. So, we have processes in place. All of our companies have embraced, to some degree, the idea of renewables. Recall in the past Georgia Power was cited as the investor-owned utility of the year by the solar industry. Recently, Alabama Power has embraced the idea of solar being part of their mix. Everybody has a different way to approach the problem. But I would say all of our utilities have a very constructive effective way of addressing the problem. And in a way where we're accountable, whether it's fuel procurement, generation, transmission, distribution, sales, we are accountable and we work with the commission to develop optimal answers for our customers. That is the best market structure and we've been able to do it for years; my sense will continue.

Got it. Thank you, Tom. Much appreciate it guys.

Thank you.

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

Hey Paul, How are you?

All right. How are you doing?

Fantastic. Thanks for being with us.

Absolutely. So, just - this question just came up I think in - when I heard somebody else ask about COVID. I'm just curious, how many people - what percentage of your workforce is vaccinated? Do you have any number on that?

So, we don't know. But I would argue, it's somewhere between 35 and low '40s.

Probably not materially different than what we've seen in the general population in the Southeast.

Yes. We're not requiring people to disclose it, for example. We are requiring certain behaviors in the workforce, that if you're not vaccinated you wear a mask, you'll socially distance, etcetera.

Okay, great. And then with respect to sales growth and COVID, I'm just wondering, as we've gotten further along, just sort of, if there is any change - what your outlook is post pandemic effects? When we're back to normal, is there a new normal in terms of what your expectations for total retail sales might be or how is that - what's your thought, I guess? Obviously, you've had a rebound and what have you. So, it's kind of noisy here. But just going forward, assuming, let's say, in 2021 - I mean, assuming at the end of 2021, we're back to normal, let's say, how would you think that the sales growth, is there any change, I guess, and what your sales growth expectations are for retail sales growth now, given the pandemic?

Yes. So Paul, let Drew and I double team this, because he brings a different perspective than me. But we've given you part of the chart package, I guess, page 11. It shows that to pre-pandemic residential is still up. So, here is one of the interesting things to consider; when we evaluate our workforce pre-pandemic, roughly 80% were kind of permanently in the office with about 20%, maybe 25%, mostly virtual, think call centers and things like that. When we tried to analyze what the new normal will be, the numbers are changing pretty significantly and it varies by local location, it varies by work function. But kind of wrap your head around this. I think we're going to be between 20% and 25% kind of permanently in the office with about round numbers 50% being a hybrids; sometimes they're in the office, sometimes they are working virtually. And then, we'll have that 20%-25%, completely virtually. If the rest of the world starts to follow this idea of a new normal, then I would expect residential sales to be up prior to 2019 levels. Industrial, appears to me to be racing back to Pre-COVID. So, we're kind of at 98% there. And the economic development activity that we see, especially - I mean, I'll give you one, Amazon - I think it's Amazon, is bringing a thousand jobs and investment of $250 million; that's one. I said if you guys watched Squawk Box this morning, I told them that in the economic development data, in forward-looking investment now. So, this hasn't happened but these are announced projects, versus 2020 are up 85%; and versus 2019, are up 65%. So, there is this burst of activity from investment. And jobs created is somewhere in the mid-20. So, what's happening? Residential may remain elevated, industrial is going to catch up, commercial is still a little bit of a question; we'll see. Drew, what would you say to all that?

I think you did a nice job of it. The only thing I might add would be around customer count itself. And so, we normally add something like 40,000 customers in a given year. This is largely residential. And we've probably added three quarters of that in just the first half of this year. So net in migration is a little bit difficult to separate from sort of use per customer, which is what we represent here. But residential is at 3% higher than what we would have expected pre-pandemic. And I think as you described that's probably here to stay. Industrial segments, we've had a couple of large industrial customers move in and out of more global productivity, or based on global economics, not a lot based on the region not being a good employer. And there are a couple of really strong sectors like automotive where there could be huge transitions that really benefit the Southeast and some. As with you, I'm very bullish on residential and industrial in particular. Commercial is going to take a little bit longer to normalize.

Yes, raw data, year-over-year. Manufacturing and Industrial was up 11.7%. The only one down there was chemicals. That was really an Olin plant that produced chlorine, caustic soda and stuff like that. And that's really, they just taken down their production, everybody else is up. We had three segments up over 30% year-over-year; primary metals, transportation and pipeline. So, [indiscernible] one last data point, which is full of this stuff. Georgia looks like it's going to be one of the first states to hit its pre-COVID level by the end of this year. And Alabama and Mississippi are expected to hit in '22. Those are some of the fastest recovering states in the United States.

Okay, great. And then, just turning to Vogtle. The testimony by staff, I hope you guys filed a rebuttal testimony which is, I think, the normal course here. But luckily, Ben [ph] asked you to do rebuttal here or anything, but in terms of sort of this tension that they brought up about BD milestones and the quality of work and what have you, would you say with this hot functional testing that if they were to look at the situation now after that, given what you guys have found, how the plan performed with hot functional testing that perhaps those issues have - would probably be diminished? And my question, in other words, you mentioned that it performed very well. And I'm just wondering whether or not that may indicate that this quality of work issue that they were bringing up would be - would it be as significant an issue maybe as we move forward?

So, here is my view on that. I think there have been a number of interesting arguments that follow your question. One that has been a consistent difference we have had with the staff. For example, it has been our dogma in doing this project to fail quickly. And so, it was I think a big risk mitigated from our standpoint to test early, find problems and fix them before they became a bigger problem later. And also, the alternative to that would have been to completely construct the system and only test it kind of when everything is done. I think that would have exacerbated the bow wave of work. The criticism, well, the way you're doing it costs more money. Yes, we would agree, but I would also say, value is a function of risk and return. For the additional cost we have followed in testing early and failing earl, the risk mitigation characteristic overwhelmed the value. Remember, it is our posture [ph] to get it right, okay. We found a lot of issues going in, not deal-killer, not huge issues, but the issues we had to deal with going into HFT. We found more during HFT and we finished HFT. We don't think we will repeat those and in Unit 4. And so, we'll deal with that. We did go through a very rigorous argument on Unit 4 about whether we should estimate it being completed in the first quarter or the second quarter. And I remember, we came back and had another argument about it. And this is like in two hour, three hour-long argument with people on the site, everybody that is involved with the project. And we landed on the first quarter. Now, let's just go through the math. Ultimately, from where we are to in service, we're kind of projecting - no, I guess, we're projecting - no, in service, we're projecting 16 months. We've added four months. So, adding four months on top of 16 is in round numbers, something like 17%, 25% or more. And so, my sense is, that's a good place to be. If you were to add another quarter, holy smokes, now you're in the - you're getting near 50% contingency income made. And for the people who were on site that felt like too much. So, listen, we had good rigorous arguments. I think we've landed in a good spot. One of the things that we're particularly watching is - so, if you say, what is the riskiest thing you're thinking about right now? So, the work ahead of us, the big work is getting the nuclear fuel ready to go to be inserted into the reactor vessel. When we look at the testing of our spent fuel pool, we found greater than acceptable leaks in the pool. We tested Unit 4, and while this testing is still ongoing, we believe that Unit 4 is looking good. So, it is not a design problem. We think it is a welding problems - frankly on Unit 3. And so, we're undertaking a complete remake of the bad, of the spent fuel pool, in order to assure the floor of the pool, to assure that it will work when it's called upon. That kind of is the biggest thing in my mind right now that I know about. Okay? I feel very confident that what we've learned on three, through the end of HFT, and now it works, we'll apply that on four in a good way. And I will say this, nearly - and I'm sorry for going on here, but let me just finish with this. We completely respect the staff opinion. And we completely respect Dr. Jacobs. We respect our co-owners. Anybody that has an opinion on this, they all have a point of view that is valid. I'm giving you what we think is the best answer and the best outcome. And the thing that is so beautiful about this process, and anybody will talk about - everybody sees everything. There are no secrets. There is no smoking gun. Everybody knows everything as we build this plant. I think that transparency has worked so much to our advantage.

Awesome, thanks so much.

You bet. Thank you.

Thank you. Our next question comes from the line of Stephen Kuczynski with Southern Company. Please proceed with your question.

No, he works for us. I don't think he - yes, that's a mistake. Go to your next question. Sorry about that everybody.

Not a problem. And that will conclude today's question and answer session. Sir, are there any closing remarks?

Yes, my question is what was Steve doing on the phone? For those of you who don't know, Steve is - he's terrific. He's the CEO of our nuclear business and he has direct management council oversight for the construction of Vogtle 3 and 4. And of course, there is a staff of people there. A guy named Glen Chick has been a hero of Southern, working so hard to make this thing a success. Here is the thing, I would leave you with, and I think the feedback we're getting from the analyst community is right on point. So, I think I'm telling you what you already know. But listen, me, personally, we all, sometimes we get frustrated with the tactics of hitting a milestone and a schedule. And the integration of the entire plant and making it work with a heat source that's not nuclear, but still making it work as it did. It was prolonged and frustrating at times, but you know what, once we got it solved, and once we got the plant at pressure, at temperature, it worked great. It was very stable. So, we fix those things. And we continue to work hard to make sure we don't repeat them on four. Still a good bit of work ahead between now and fuel load. I think we've outlined that carefully for you. And so, we look forward to getting the fuel load for Unit 3. Unit 4, for the kind of productivity that we have suggested to you, let's just deal with the percent completes per month. So, the 19 to 13, right, 1.9 to 1.3, we have done already at Unit 4, 1.4, and we have done kind of the 1.9 level on Unit 3 for seven and nine months at time. So, these are levels we have done in the past. In the estimate we have given you, we have estimated, however, lower productivity. That's to give ourselves a little more margin on cost and schedule. So, we're trying to be sensitive to really hit these numbers. Outside of Vogtle, we're very excited about the progress. But outside of Vogtle, this franchise, whether we're transitioning the fleet to a low carbon future, whether we're running the business to make it more resilient to extreme weather or attacks in the cyber and physical realm to preserve our national security, we are doing great. And we will continue to do great. And so, we're making progress on all of those functional front. Last thing, I'll just mention, when I think about our D&I efforts, when I think about diversity, and when I think about the improvements of culture - we mentioned to bringing Southern Company gas into the fold. I guess, bringing AGL in the fold now - Southern coming in - we have crossed populated Southern Company Gas now run by Kim Greene. Drew Evans is over here being CFO at Southern. The cross population, the learnings has strengthened our culture and increased, if you will, our cultural bandwidth. This company is better off in the long run for all of these efforts. And I think now when we've renewed our efforts on diversity and inclusion, we'll be even better. So, thank you, exciting day today, and look forward to talking with you in the future. Thanks everyone for listening.

Thank you, sir. Ladies and gentlemen, this concludes the Southern Company's second quarter 2021 earnings call. You may now disconnect.