The Southern Company (SO) Q3 2026 Earnings Report, Transcript and Summary

Good afternoon. My name is Alicia, and I will be your conference operator today. At this time, I would now like to welcome everyone to the Southern Company Third Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Mr. Greg MacLeod, Director, Investor Relations. Please go ahead.

Thank you, Alicia. Good afternoon, and welcome to Southern Company's Third Quarter 2026 Earnings Call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company; and David Poroch, Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K, Form 10-Qs and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measures 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 Chris.

Thank you, Greg, and good afternoon, everyone, and thank you for joining us for today's update. Southern Company continues to deliver strong results for our customers, communities and shareholders. We don't chase headlines. We believe credibility is paramount. We do what we say we will do, and our exceptional third quarter results demonstrate the strength of our business and the consistency of our execution. Our scale, our experience, our market structure and our customer-focused business model are allowing us to capture transformative growth while delivering meaningful benefits to the communities we serve. Across the Southeast, our customer base continues to expand and electricity demand is rising, reinforcing the economic strength of the region. Our superior performance and growing momentum support the increasing confidence in the durability of our outlook, positioning us to exceed our original 2026 adjusted earnings guidance and strengthening the opportunity to raise our earnings outlook for 2027 and beyond. We are seeing the highest level of weather-normal sales growth in generations, and that growth continues to accelerate, up 3.5% in the third quarter and 2.7% higher year-to-date. All customer classes are higher, led by commercial sales, which were up 7.3% compared with the third quarter of 2025. We are signing new contracts. And today, this large load customer demand is translating into increasing usage. Notably, data center usage was 59% higher this quarter and is now up 52% year-to-date, primarily due to accelerating load ramps from data center customers. We continue to see steady population growth in our territories. Residential sales are up 1.3% this quarter with approximately 15,000 new electric residential customers, along with nearly 6,000 new residential gas customers. And the usage trends across our industrial customer base continue to demonstrate robust growth across nearly all our top segments, including the primary metals, lumber and transportation segments, driving industrial sales meaningfully higher in the quarter. As we look ahead, the growth in the Southeast continues to be broad-based, led by strong economic development activity across Alabama, Georgia and Mississippi. The region is on track to double its prior annual record of announced capital investment. Just in the third quarter, announcements were made for nearly $25 billion of investment in more than 5,000 new jobs, led by several manufacturing, automotive and data center announcements from companies such as Airbus, Gulf Ship, OpenAI, Pirelli and Walmart. Further, in just the last few weeks, both Mitsubishi Power and Audi made major announcements continuing the significant reshoring momentum in our electric service territory. Mitsubishi Power plans to double its investment in its gas turbine manufacturing facility in Savannah, Georgia, that will help meet the rising power generation needs in the Southeast and across the country. Audi announced their first U.S.-based production site in Peach County in Central Georgia to manufacture SUVs for the North American market, expecting to invest $4 billion and create 4,500 permanent jobs. These projects will bring the total announced future business investment in our Southeast service territory to over $45 billion, by far the largest amount we've seen in any one year. Collectively, these type projects are expected to help fuel local economic growth and job creation for years to come and support the deep diversification and resilience of the economy in the region. Thanks to our customer-focused strategy, along with broad-based economic development activity, our outlook continues to strengthen as we serve this growing demand across the Southeast in a responsible and sustainable manner. And we continue to deliver on large load projects. Our portfolio of signed large load contracts has now grown to 21 gigawatts with an additional 7 gigawatts in late stages across Alabama, Georgia and Mississippi. In the quarter, both Alabama Power and Georgia Power each added approximately 2 gigawatts of contracted load. These contracts include industry-leading provisions designed to provide clear protections and benefits for existing customers while providing improved visibility and confidence in our financial forecast through minimum bills that are decoupled from electricity usage. Large load and data center customers are paying at a minimum their full share, enabling Alabama Power and Georgia Power to pass along meaningful benefits to customers today and into the future. We are committed to holding base rates flat in Alabama and Georgia until at least 2029. In fact, Georgia Power reduced rates this summer, which is saving a typical residential customer nearly $50 per year. Beyond lowering rates in 2026, let me remind you, Georgia Power has committed to deliver nearly $3 billion of customer benefits that will help lower costs for the typical residential customer by approximately $180 annually after the current rate freeze period. The ability to save our customers money today with multiyear rate stability is directly attributable to attracting, pricing, contracting and serving growth throughout our service territory using a contractual framework that benefits customers today while also protecting them for the long term and help support our regulatory strategy. We are executing on this growth opportunity with the same discipline, credibility and customer focus that has long defined Southern Company. This opportunity today is a product of decades of constructive collaboration with leaders across the full landscape of regulators and policymakers to achieve outcomes that benefit our customers and strengthen our communities and support economic growth. Our goal has always been to make the communities we serve better because we are there, and we look forward to continuing to build relationships and work collaboratively with existing and newly elected officials on the issues that matter most to our customers and our region. David, I'll now turn the call over to you for further updates on our financial performance.

Thanks, Chris, and good afternoon, everyone. This morning, we reported strong adjusted earnings results for the third quarter with each of our businesses contributing to performance meaningfully above the estimate we provided last quarter. For the third quarter of 2026, our adjusted EPS earnings per share was $1.94 per share, $0.34 higher than the third quarter of 2025 and $0.29 above our estimate. The primary drivers of our performance for the current quarter compared to last year were warmer weather, increased usage and customer growth, growing revenue from large commercial and industrial customers, including data centers, along with higher earnings from Southern Power. These positive drivers were partially offset by higher nonfuel operating expenses and taxes other than income taxes, along with dilution impacts from additional shares outstanding. Year-to-date, our adjusted EPS was $4.40 compared to adjusted earnings of $3.76 for the same period in 2025. A complete reconciliation of year-over-year earnings is included in the materials we released this morning. Our adjusted EPS estimate for the fourth quarter is $0.30 per share, which, combined with our strong year-to-date performance, would represent full year adjusted earnings of $4.70 or $0.10 higher than the top of our original 2026 adjusted earnings guidance range, representing 9% year-over-year adjusted earnings growth. As growth accelerates across the Southeast, we are meeting rising power demand in real time through significant ongoing new generation and infrastructure projects. And we continue to identify additional investment opportunities beyond our base capital plan across the energy value chain. On our first quarter call, we announced Southern Power was moving forward with 400 megawatts of upgrades at existing natural gas facilities. In the third quarter, Georgia Power announced and received approval for a partnership with Google to economically unlock additional nuclear capacity through upgrades during scheduled maintenance outages over the next several years. And just 2 weeks ago, Southern Natural Gas, in which we hold a 50% ownership stake, announced the Southeast Connector pipeline expansion to further support growth and access to diverse fuel supplies. Together, these projects represent approximately $4 billion of projected investment above our $81 billion base capital plan that we originally shared in February. As a reminder, request for proposals or RFP processes are underway in Alabama and Georgia to procure additional generation in the early 2030s, and we expect to gain more insights from these RFPs in the coming months. To the extent potential company-owned resources are selected through these processes and ultimately authorized by the respective PSCs, this could represent substantial incremental investment, together with opportunities for additional investment across all our businesses, including those at Southern Company Gas, Southern Power and PowerSecure, our capital plan could potentially approach $100 billion over a 5-year period. As future capital investment opportunities continue to grow, we remain committed to funding incremental capital investments in a credit supportive manner on our path towards 17% FFO to debt by 2029. Over the last year, we have leveraged a variety of capital markets tools to finance the business in a shareholder-friendly fashion while also drawing upon a portion of our approximately $27 billion of low-cost Department of Energy loans available to our two largest utilities. Our proactive financing practices are supportive of our credit objectives while helping to support the durability and resilience of our long-term outlook in a rising interest rate environment. This quarter, we settled $1.2 billion of equity previously priced through our ATM program at an average share price of $95. Combined with amounts settled in prior quarters, all $5.3 billion of forward priced equity has now been settled, further strengthening our balance sheet and highlighting our commitment to credit quality. Considering the equity addressed to date, along with the incremental $4 billion of projected investment above our base capital plan, we project a remaining equity need of approximately $2 billion through 2030, consistent with our communication of to fund additional investment with approximately 40% equity or equity equivalents. I'll now turn the call back over to Chris.

At Southern Company, we have a strong record of delivering on our expectations. And this philosophy and disciplined approach continues. As David highlighted, we're on track to finish the year strong, earnings meaningfully above our original expectations. This performance is a reflection of tangible momentum, strengthening fundamentals and a disciplined execution across our portfolio of businesses and is translating to sustainable higher expectations in our long-term outlook. This coming February, as part of our annual update, we plan to refresh our financial outlook through 2031, including capital investment, sales and rate base growth, financing and earnings expectations. Consistent with the higher 2026 expectations we shared today, the sustained momentum we see gives us strong confidence for the future and provides an opportunity to potentially raise the upper end of our near-term guidance ranges that ultimately will support an improved outlook into the next decade. We look forward to updating those expectations on our next earnings call. I want to emphasize how incredibly excited we are about how Southern Company is performing and how well positioned we are for the future. The growth in power demand has rightly been described as unprecedented and in many ways, is transformational. When you combine these and other factors with 25 consecutive years of dividend increases, more than 3/4 of a century having never reduced our dividend, 8% EPS growth with upside and our strong credit metrics, our value proposition objective of superior risk-adjusted total shareholder return is second to none. And we believe Southern Company is best positioned to succeed in this exciting future with the same discipline, credibility and customer focus that have long defined our company. As we conclude today, I'd like to touch on the operational performance and recent storm activity in our Southeastern states and the exceptional response from our team members. This summer, our electric and gas systems met significant demand driven by growth, record temperatures and sustained elevated usage. The third quarter was one of the warmest quarters in our service territory over the last 50 years and we delivered electricity sales that were higher than any prior quarter on record, while providing the best-in-class fleet reliability. In early October, Hurricane Isaias made landfall on the Gulf Coast causing destruction up and down the Southeast. Our dedicated teams in Alabama, Georgia and Mississippi, along with thousands of additional resources to the utility industry mutual assistance network mobilized in advance of the storm and responded quickly to restore power to over 650,000 impacted customers. In Alabama, where the storm was most damaging in our service territories, Alabama Power safely restored power to 95% of the impacted customers within 48 hours. This storm proved the value of ongoing investments in grid resilience and cutting-edge technology such as SPEAR, a proprietary AI tool, which helps us predict where to deploy resources in advance of a storm. At Southern Company, preparation is a year-round priority, and I am proud of the excellent performance of our system and an unwavering commitment from thousands of hard-working dedicated crew members, and I thank them for what they do each and every day. Operator, we are now ready to take questions.

[Operator Instructions] Our first question comes from the line of Shar Pourreza with Wells Fargo.

Chris, maybe just touching on some of the recent changes in Georgia. I mean, notably, we saw a party flip at the PSC. That's something we haven't seen for some time. Obviously, you guys have upsides you're highlighting, but then you have the end of this rate settlement in '28. I guess, Chris, how do you kind of build confidence here with the plan, especially as you roll forward with sort of the untested PSC dynamic that's formed and a major rate case that's forthcoming, especially as you're thinking about raising the CAGR, et cetera?

Yes, sure. I mean I think that's an excellent question. As you think about the results coming out of the election this week, I think, hopefully, you get a sense, we are very confident in our performance, and we're very confident about the growth we've seen in the past and the growth we see going forward. Also, we feel good about the confidence in our ability to share those benefits with our customers as well as the communities. I mean if you look at exit interviews from the elections at the top of the list of concerns from those that voted were concerns about issues of affordability. If you look at what we have been doing with rate freezes, with benefits, with how we are providing benefits from growth to customers, existing customers as well as to the communities, we think that's a strong platform to stand on. And as we engage and work with the new commissioners in Georgia, new commissioners in Alabama, providing benefits back to customers, I think, will resonate well. So said to you this way, Shar, you know how disciplined we are in all that we do, and we're going to be very conservative as we kind of give you forward-looking guidance. So, yes, we've got a lot of confidence in what we see, but we also have great confidence in how we are taking advantage of growth to make sure we provide incredible benefits back to customers. And so as we continue to grow, we look forward to providing additional benefits back to customers. And so that gives me -- gives us, I think, great confidence about where we are and how we move forward through into the future.

Got it. No, that's perfect. And you've got the history to show that. So -- and then just, Chris, on the funding, the capital plan, obviously, it's a $100 billion figure on roll forward. It's a massive number. And I know in the prepared, you guys talked a little bit about the incremental equity needs, 40% as a rule of thumb. But I'm just wondering, just given the cash flow nature of sort of the large load pipeline, especially if they're making upfront payments, could that sort of help mitigate some of your historical equity needs? So is 40% the right number? Or as you're adding these large loads, which have sort of this cash flow accretive nature to them, could that provide some downward pressure in the equity needs?

Yes. Good question, Shar. The forecast for us remember, we're continuing along that journey towards 17% by 2029. And so our modeling would suggest that with the contracts that we're signing and with the capital that we're going to be deploying, we continue to believe that about 40% remains about the right term for us. And so as we continue to make progress on that journey towards 17%, we'll revisit that. But in the way we look at the world right now, we think about 40% is a good target for us to continue to point.

Our next question comes from the line of Nick Campanella with Barclays.

Maybe just to be a little bit more explicit just with affordability being kind of the theme nationally that's continuing here. And obviously, you guys are very focused on it. The stay out in Georgia ends in '28, I believe. Just what's the ability to offer those further stayouts in either Georgia or Alabama? And at what point in the time line do we have to kind of start thinking about that or making subsequent filings, understanding that you don't have many filings in front of the commission right now?

Yes. I mean, we have to make a filing in '28. And so I think it's very premature to think about anything different. I mean I think, as I said to the previous question, I mean, our focus is the confidence we have in how we're performing, but also with the growth opportunities, making sure we share those benefits with existing customers. I think if we address that, we provide those kind of benefits to customers. That really helps respond to issues of affordability. And yes, I mean, there's always more to be done. And so the energy efficiency opportunities, the demand side management things, weatherization. I mean, there are a lot of tools, a lot of levers we have, I think, to respond to some of the concerns that are out there in the marketplace. We focus a lot on rate stability in terms of how we keep rates flat, but adjusted for inflation, I mean, that really is downward pressure on rates for our customers. And so I think this kind of comprehensive focus on our part, we'll spend time with the commissions, like I said, in both Georgia and Alabama to see where they are and how they want to proceed, but we're going to continue doing the work that we're doing, making sure we're providing and being very sensitive in hearing the issues and concerns of our customers and providing them with great service, but also with benefits on the affordability side.

Okay. No, that's really helpful. I appreciate that. And then when you kind of talked about in the prepared just to potentially raise of the upper end of the near-term guide that ultimately supports an improved outlook into the next decade. As we wrap in the $100 billion and you reevaluate the CAGR, is this more about an extension or an increase to those ranges, just to be clear?

Sure, Nick. When we -- as we work through that, what we've been able to deliver so far and what we see in the businesses and their performance and carrying into that momentum carrying into '27 and '28. We feel good at the moment to be able to raise that upper end of the guidance in those years. And we think that, that's going to put us in a, if you will, a higher starting point for the 7% to 8% path starting in 2028 and well into the next decade. And we've got a lot of things to work through in terms of quantifying that, and we'll be able to address that in the Q4 call. But we see a lot of growing momentum around the contracts that we're signing, additional opportunities for capital deployment, the advantages we've taken in the marketplace around capital, and we'll be able to pull all that together for you in the Q4 call, but feel really good about being able to extend that range of growth for the next couple of years as we set into the longer term.

Yes. And the only thing I'd add, Nick, just think about what this signals and says for a company our size and with the scale that we have. And so consideration of what we're talking about and the significance of it, I just want to make sure you don't let that go unnoticed for the size and scale of our company.

Our next question comes from the line of Anthony Crowdell with Mizuho Securities.

I guess I wanted to stay in the same vein as Nick was just asking, just maybe more cleanup. I think previously, the current rate plan in Georgia Power is 2026, '27, '28, where you kept rates flat. In your prepared remarks, I think you said you're going to have no rates flat through at least '29. Have you already added on a year there? Just more clarity on that as I maybe misunderstand what was said in the remarks.

I think we said 2029.

Got it. Okay. And then just on Slide 11, you guys gave the nice funnel there. Contracted load rose 4 gigawatts, but you seem to be refilling it at a pretty good pace that you still keep it at 75 gigawatts is like prospective pipeline. Just talk about maybe how quickly that keeps refilling that funnel. And are the projects Georgia, are they Alabama, if you could just more color on that.

Still a lot of activity in Georgia. But as we have been signaling over the past couple of quarters, I mean, we continue to see activity move, migrate to the West. And so it's Georgia, Alabama and also in Mississippi. I mean, so we see the funnel, the pipeline continuing to replenish. Now are we going to land 75 gigawatts of projects? Probably not. I mean we'll continue to risk adjust it. but I think it's a clear indication and a demonstration of the interest in our territory. And as you see on an ongoing regular basis, we continue to sign projects, and we continue to signal to you in terms of what's in various stages of the process. So all this says, I mean, there's continued and significant interest and activity in our service territory. And we're excited about what's taking place here, the potential here. But also we're just excited about the customer benefits that we're able to provide because of this growth.

And just if I could throw one more in, apologies. I know it's only 1 day. We're 2 days since election day. Turn out maybe some states may be not as -- does not have the ability to maybe lock in some of these large customers. Do you guys anticipate maybe more opportunities coming your way as other states maybe slow down or turn off the business at these large load customers and that you guys are a net winner from this? Or I know it's only 2 days. Any discussions you maybe have with large customers on it?

Yes, Anthony, I think that's a tad bit premature. I mean we have -- I think probably since 2022, we've had just a steady flow of engagement and activity and a steady strong pipeline of activity that we've seen. We know these projects are shopping all across the country in a lot of different places. So in terms of what happens with various policy decisions, I think it would be premature to speculate what the implications of how that turns out at this time.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

When you raise the upper end for '27 and '28, does that rest on the $85 billion already identified? Or does it assume some of the Alabama and Georgia RFP capital? And then as the plan moves towards the $100 billion, how much of the added earnings would land by 2030 versus after? The disclosure is great. I'm just trying to frame the pace of investment and then the pickup in earnings.

Fair question. Good. I think there's a lot of factors that we're working through that are influencing where we see ourselves winding up in talked about the accelerating sales growth that we're seeing throughout the year. We came out with high expectations for 2026, and those expectations have come to fruition. So we see momentum moving across the whole service territory. And it's not just data centers. We've got significant announcements around economic development coming into the service territory and customers expanding their operations, population growth. So it's a lot of factors around sales growth. And yes, we do have the 21 gigawatt signed contracts. We do see significant opportunities in the next several months related to our late stage and finalizing contracts. So there's more growth there. And we've talked about the opportunities in the ongoing RFPs at Georgia and Alabama. And we won't get ahead of how that process is going to work, but we see those are capital needs in the 2030s. And we see pretty significant upside to that. We've talked about in the past a rule of thumb of, say, $2 billion, $2-plus billion for each gig of capacity that we might have the opportunity to construct. And those are well-structured processes. They're very transparent, independent evaluators, bids from the market. So whatever the best opportunities are for our customers and resiliency and affordability is what we're going to do. And we see those opportunities going well into the 2030s.

That's great. That answers that quite well. One follow-up, if I may, on Alabama. Under the proposed earnings deferral that you have there, which of the risk mitigation thresholds are going to kind of determine when those amounts actually enter earnings? And how could that sort of affect earnings between the years through 2030?

Yes. That's going to be worked out with the commission as those circumstances give rise. The best way I might want to think about that is almost like storm damage accounting, right? You can think about it where a cost would be incurred, if you will, from a rate-making perspective, and that will flow through the income statement and create a regulatory liability. And then to the extent that circumstances arise, the Alabama Power and the Public Service Commission will work out how that gets relieved through the -- back through the balance sheet and through the income statement. So it's intentionally designed to be flexible. And that would probably be more, I would think, in the latter part of the contract lives. So probably taking that well into the next decade and perhaps even touching into the 2040s depending on the contract. But again, I would analogize that I think storm damage accounting or regulatory proceedings is a safe analogy and intended to have good flexibility between the company and the commission.

Our next question comes from the line of Carly Davenport with Goldman Sachs.

Maybe just to go back to Georgia quickly. I guess just going into the elections, there was a lot of rhetoric around executive orders to pause new data center developments. I guess just as you think about what's embedded in your base plan, do you see any potential risk to any of those investments or projects moving forward? Or do you feel those are adequately protected by the tariffs that you have in place?

My sense is I feel pretty confident about what we have in place. There's not been any talk about retroactive or looking backwards. And so they are contracted loads, and so we've got protections there. I mean I think there's -- will probably be conversations about how these things play out going forward. But we have strong confidence in kind of what we've done in the contracts that we signed that are in place and are in effect.

Great. Appreciate that. And then just tactically, great to see the EPS execution year-to-date. Just as we think about the fourth quarter guidance you've now provided, are you planning on pulling forward any O&M into the quarter to take advantage of the strong performance this year? Are there any other discrete items that we should be mindful of as you bridge to the $0.30?

Well, I think a good way to think about that, and I'll use a term from a former CFO, Art Beattie that we go out of our way to try to fix the roof while the sun is shining. And so we've been taking that upon ourselves kind of all year long and really have made some good progress to take care of some things this year to further bolster our confidence around the future years.

Our next question comes from the line of Jeremy Tonet with JPMorgan.

Just wanted to go back, I guess, to Slide 14 here and talking about the potential to move up the 5-year plan towards $100 billion here. Just wondering if you might be able to give us a sense for how that $15 billion might look between state regulated versus competitive and interstate pipes. And even within competitive power and interstate pipes, I guess, how the breakdown might look there? Just trying to get a sense for what this all means.

Yes. No, good question. I think it's safe to say that we will continue to be predominantly. And when I say that, I mean, kind of 90%, 95% target around the state-regulated investments. And you think about even a little bit beyond the state-regulated investments and if you will, federally regulated around our investments at SONAT. And so we're going to be highly concentrated in state and federal investments as we always have and for the foreseeable future, continue to see it that way.

Got it. That's helpful. And then just wanted to come back to nuclear. I know we've touched on this in the past, but it seems like behind the scenes, there's been a lot of work on the federal level to get new nuclear developed and a lot of support from the federal government and as well as, I guess, move towards a framework where all stakeholders kind of share in the risk, align incentives and try to move forward here. Just wondering from your perspective, I guess, what do you see going forward here? Could there be new nuclear?

Well, we've said and I've said a number of times how important new nuclear is, I think, at this time to help support and respond to the growth that we see in our economy and the markets today. This administration, I mean, has done, I think, an incredible job bringing people together, having conversations, discussing what needs to happen to get the new nuclear industry started in this country. Those conversations continue. And so I think there's good solid recognition about where we are. There's also, I think, sensitivity and recognition about what's needed to get this done in terms of making sure that they are the proper mitigation strategies and risk mitigation strategy is in place to kind of convince companies to take that step. I mean I think it's risk mitigation, but I also think there may have to be some degree of some type of incentive to also encourage companies to take that step. I mean there's a lot of activity going on in the nuclear space and the new nuclear space, which I think is incredibly exciting. But I think there just continues to be more conversation has to take place, I think, for others to get comfortable to take that step. We're not in line to do this, just making it perfectly clear. That's not for us. But I think kind of making sure that this does become a viable option for this country in responding to this demand, I think is something that we all have to lean into from a policy standpoint to make sure we are supporting and engaging in the conversation. But big kudos to this administration with all the work that they're doing in this regard.

Got it. That's very helpful. And then I just want to come back, I guess, real quick, I guess, the governor elect and the potential for pause in data centers here. Just procedurally, what would that look like here? Any expectations?

I mean I don't see any expectations. I mean there's been a lot of conversation about potentially pausing, I mean, having her having been mayor before and very responsive and supportive of kind of local jurisdictions managing these processes. I mean so I think we'll say we'll see how this plays out. I mean I think it's going to be important for us to make sure that we communicate the projects that we signed, how they've been done and how they are not costing existing customers. They don't have to support this work. I mean the data centers that we signed up, I mean they're paying, as we say, at a minimum, at least their full share. And so I think we got to make sure that, that story is true. I mean I think there are a lot more things to be done in terms of community benefits and telling the true stories about water and all the stories that are out there and in the marketplace. I mean I was thrilled to see today OpenAI came out with a campus commute initiative in terms of, I think, really trying to even more crystallize kind of their commitments to communities in terms of that partnership and the role of communities planning and responding to questions about transparency. I think those are some of the kind of things that can be done. And so I think it lay out kind of some criteria in terms of what must be done, I think, is a positive way to think about moving forward with these projects. So I think right now is wait and see, and see how it all plays out.

Our next question comes from the line of Amicucci with Evercore ISI.

I want to just kind of piggyback on Mr. Tomas, prior comment. As we -- and kind of put a little bit of a finer point, I guess, as we think of the $25 billion of collateral that's required by 2030, I guess just how much of that is posted now in what form? And I guess, against whose credit does that kind of go against?

We'll stay away from how much is in hand at the moment just for -- but it's several billion dollars. And it takes various forms, right? So we work through our kind of collateral criteria, our credit quality criteria as we're working through these contracts, and it can take various forms, a high credit quality, highly rated counterparty, we may be able to take a parent guarantee for a substantial portion of their commitments. Other counterparties that may not have the balance sheet or the credit quality that others possess, we will work with them to arrange for letters of credit from banking institutions, highly capitalized banking institutions that we find acceptable. All in, we get to about a AA or so, A-, somewhere in that window on average credit metric that we find very comforting to make sure that their commitments get fulfilled.

Makes sense. Understood. I guess then just kind of -- I don't mean to kind of beat a dead horse here, but just if there were to be a delay and we kind of have some of a little bit of a slower load growth type of -- or a slower load scenario, I don't want to say load growth, just slower load from a large load perspective type of scenario. I guess, where -- what are the necessities kind of to -- that are current versus where there are potential deferrals?

Well, I think you got to look back at the contract structure because I think what you're talking about is if ramp rates don't hit at the timing that have been negotiated within the contracts, I presume that's what you want to talk about. And so if that's the case, our contract structures are very clear where the minimum bills that cover at least 100% of the cost being introduced into the system are fixed. And so before the kilowatt moves over the meter, we are recovering our costs embedded in those minimum bills. So we've kind of disengaged ourselves from the need for a customer to achieve their ramp rate for us to recover our cost.

Well, I was actually trying to touch upon like, I guess, from a reliability perspective, like what -- when we think of necessity for just reliability within the region versus kind of those large loads, but...

From a reliability standpoint, I mean we're making investments in the grid all the time every year. I mean we're focused on reliability resilience. doing recent storm, I mean we use that as an opportunity to not necessarily put the system back the way it was, but are there things we can do to harden. I mean so that work is ongoing and continuous across our system to support our commitment to top quartile reliability and making sure, I mean, whether it's the distribution side, transmission side, we're continuing making those kind of investments and commitments to the system, to the grid.

Perfect. So consider a separate and distinct effect.

Our next question comes from the line of Richard Sunderland with Truist Securities.

I just want to follow up on a couple of small items here. Turning back to Slide 14 and some of the opportunities comprising that $100 billion figure you laid out. I'd love to get a temp check on Southern Power in the context of that broader $100 billion figure. I think you've described in the past the waterfall of opportunities like kind of upgrades in brownfield and greenfield. Do you expect to have some progress across all three buckets for your 4Q plan uptake? Just trying to think about how engagement is pacing on the Southern Power side.

Sure. Good questions. And those contract negotiations are ongoing. We're having really good conversations. And frankly, it's not just in the Southeast. There's opportunities around the country that we're looking to capitalize upon. And that's probably going to stretch out over the next few years as we work through those details, but feel really good about the opportunities, not just at the electric operating companies, but also at Southern Power. And PowerSecure has got some opportunities as well and growth that they've been delivering. Granted, they're much smaller relative to the company, but they're doing really well in this environment. And so we continue to deploy those opportunities and then continue to deliver on large load contracts, which will create more opportunity for capital deployment to serve those contracts in the future.

On only one thing I'd add. I mean, I think a lot of times, because of the growth we're seeing in the regulated part of the business, sometimes Southern Power activity it's kind of put to the side. I mean there's a lot of opportunity there from a contracting opportunity from greenfield to new sites. But at the same time, as they do that work, protecting kind of the discipline that we have around long-term contracts and doing that work with creditworthy counterparties. But there's a lot of opportunity, I think, occurring and a lot of excitement across the Southern Power business unit about what they see, what they have under consideration.

Turning to Slide 11 and some of the customer breakdowns you have in there. Could you quantify a little bit more finally sort of the data center and neocloud customers that are embedded in that contract bucket as well as the other stages of the pipeline? I guess I'm just curious on a composition perspective, how you see that standing today and then trending over time as you sign more contracts.

Yes. I think you asked about the composition of that contract complement, I think. And so they're really all over the board in terms of traditional web hosting businesses as well as hyperscalers. Recently, what we've been signing are more predominantly hyperscalers, no doubt. And then some of those are the large language model learning opportunities, but they really kind of are all over the board, and we've been serving these type of customers for several years. And then what we're experiencing now, it's a really fascinating phenomenon to see play out where we're starting to get into amendments of contracts and kind of recontracting where some of these hyperscalers have come back and said, I had a really good experience here. I know what I'm getting. I see the opportunity, the visibility, the vertically integrated market is a differentiator. So let's talk about expanding that relationship. And so we're working through some of those opportunities right now as well.

I may add one other thing. One of the things I think you're going to begin to see more of is campuses. And so as the initial project is established and that builds out, there's a lot of interest in terms of doing more at those locations. So that creates a wonderful opportunity to establish these campuses where this work is being done. I think you're going to continue to see -- you'll see more of that as this work unfolds as this sector continues to expand and grow over time.

Our next question comes from the line of D'Ambrisi with RBC Capital Markets. Stephen D’Ambrisi: Just had a quick one. I wanted to follow up on the $100 billion potential upside capital. Just on the slide, it talks about $2-plus billion for every gigawatt. Can you just, I guess, first talk a little bit about if you're seeing any inflation in that number? Like it seems like when we're talking to companies, we're hearing more CCGTs or CTs with a 3 handle. And so just if there's any upward pressure even on just the assumption for every incremental spend for every gigawatt? I just have a follow-up, too.

Yes, fair question, and we've been seeing the same thing. And so we intentionally used the $2 billion plus, and that does span a bit past $2 billion. And now keep in mind also, in our benchmark, we're talking about kind of more focused just on the capital cost of the generating asset, not necessarily looking at the all-in transmission infrastructure that might be needed for a particular generating asset. So $2 billion plus is probably a decent benchmark at the moment, but certainly acknowledge your point, and we see it as well. Stephen D’Ambrisi: Okay. That's helpful. And then just if I -- again, if I use the $2 billion plus as like divide it into the potential $15 billion of incremental capital, like if it's all associated with upside load, it sounds like maybe you're talking about $7-ish gigawatts of incremental RFP wins. And I think the Georgia RFP is 2 to 6 gigawatts and maybe the Alabama RFP is not really defined. So can you just talk about like, again, it feels like there could even be upward pressure to what you're talking about, but just want to understand kind of the assumptions underneath it.

Yes. I think that's a fair point. And you're right. Our load forecast in Georgia really does kind of suggest that we would be at the near the top end of that 2 to 6 range. Alabama, we're working through that. That's a process that will come to clarity probably later in 2027. But the progress that we've made in Alabama would suggest several of capacity needed. And so that process will continue into 2027.

Our next question comes from the line of Sophie Karp with KeyBanc Capital Markets.

A high-level question on policy for you guys. So it seems that logical customers, right, has been delivered -- is delivering a benefit to customers. And it's becoming easier to quantify as we go along. Do you think that new incoming leaders will be receptive to being sort of educated on this matter? Because it seems like a lot of pushback on data centers has not been very rational in the media and elsewhere. So do you think that you'll be able to explain and lay out this case where it's actually helpful to have those large load customers? And will the policymakers be receptive to that? That's my question.

I think, it's a very good question, but I'm very confident that we will have the opportunity to go work through, educate in gory detail how all this works out and how it -- how we work through, how we model, how the contracts signed, the pricing, all the aspects of it and then how we use this to, one, make sure that large loads are paying their full share and at the same time, how these large load contracts and projects provide benefits to existing customers. And so yes, in terms of having taken the time going through the details of how all this plays out and how it gets to a point where it provides benefits to existing customers, yes, I'm pretty confident that we'll have the opportunity that -- and I'm sure I can't speak for the commissioners, but they will want to understand all this in great detail. Yes, I mean, there's -- I've said it before, there's a lot of misinformation on in social media and a lot of other places about these projects, data centers, large loads and what's real and what's not real. And so I think we will have the opportunity to kind of talk about how we're doing it and talk about what's true and what's false. But yes, I think we'll have the opportunity to do that.

Yes. So do you think you'll be able to stick to the governor leg before she takes office, so before she kind of has a chance to fire off the executive orders and like later the case?

Yes. I will say for her, we've already done that with her. We did that with her even during the campaign. I mean, so we've spent time with Governor Lance Bottoms prior to the election last Tuesday kind of explaining the process, helping her understand our procedure, how we're doing this. And so yes, I look forward to building on kind of some work that we've already gotten started to make sure we kind of answer any additional questions or share perspectives and give advice and guidance on how this should play out. But making sure that we get kind of -- yes, lastly, making sure we talk about the benefits to communities, to customers and the economic opportunities that come along with these projects. So very excited about these opportunities to educate.

Our last question comes from the line of Travis Miller with Morningstar.

Going back to the idea of this affordability, as you've been talking with policymakers, are there ways you can address their concerns or at least public concerns around affordability through maybe rate design or some other type of rate mechanisms that maybe derisk some of the politics around a full base rate case.

I think it's -- I think there's a lot of -- continue to do a lot of things that we're doing in terms of explaining the value and benefits of a base rate freeze, understanding the opportunity to provide benefits as a result of these large loans as a result of growth, how those benefits accrue and then as we continue to grow, speaking to how we can extend and provide additional benefits. I mean I think that's the opportunity in terms of addressing issues of affordability and speak to kind of our deep focus on issues around rate stability. So yes, we got to continue to do the work we're doing, but also making sure that we explain how this plays out -- but yes, I mean, I think for us and our markets and our territory is doing -- continue to do a lot of what we're already doing. Yes, I think we've got to make sure everybody understands what we're doing. And then when the opportunity presents itself, do a little bit more.

Sure. Okay. And then renewable energy, any shifts, do you think there, either through the election or other shifts in mentality at the federal level or state level that might be opportunities to invest more in renewable energy?

I mean that has always been a part of our consideration and efforts and actions that we have in place as we grow and as we increase generation as we meet these needs. I mean you look now, I mean, we're bringing on large size. I think we're close to about 1 gigawatt of battery storage on the system today. We have -- our expectation is by the end of the decade, be real close to 6,000 megawatts of battery storage. And so as we work through these needs, I mean, renewables is a major part of that consideration, batteries, solar, other opportunities, hydro generation and updates at the hydro facilities and getting more capacity out of those units. And so yes, I think that will definitely continue to be a part of our consideration as we respond to this load.

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

No. We just thank you for those who joined the call. We're excited about where we are at Southern Company. We appreciate all the hard work that our teams are doing during storms each and every day. And so as we always say, we encourage them to make sure they stay focused on safety, keep it as #1 priority, but also take care of each other and take care of themselves. Have a great day. Thank you very much.

Thank you, sir. Ladies and gentlemen, this concludes the Southern Company's Third Quarter 2026 Earnings Call. You may now disconnect.