It’s not like they weren’t warned,

about coal


and

about nukes.
It’s not Standard & Poor’s this time,
but that could happen soon, too.
SO’s biggest part, Georgia Power, is neck-deep in nukes,
as

Edison Electric Institute’s warning
about

the disruptive challenge of distributed solar
starts to affect its parent’s stock price.

Zacks.com wrote 21 June 2013,

Southern Company Slips to Sell – Analyst Blog

On Jun 20, Zacks Investment Research downgraded electric utility
firm, Southern Company ( SO ), to a Zacks Rank #4 (Sell).

Why the Downgrade?

Southern Company witnessed sharp downward estimate revisions after
reporting weak first-quarter 2013 results. On Apr 24, 2013, Southern
Company reported first-quarter 2013 earnings per share (excluding
certain one-time charges) of 49 cents, below the Zacks Consensus
Estimate of 51 cents. The weaker-than-expected results could be
attributed to spiraling expenses.

Moreover, Southern Company’s total operating expense for the first
quarter of 2013 stood at $3,572.0 million, approximately 25.9%
higher than the prior-year level.

Additionally, Southern Company’s heavy reliance on coal-generated
energy supply and a lack of meaningful contribution from renewable
energy is a matter of concern. In the current age of growing
emphasis on ‘environment friendly or green’ energy, the company may
be forced to divert cash flow to ensure regulatory compliance, which
can adversely impact profitability.

We also remain skeptical regarding Southern Company’s $14 billion
investment for the construction of two new reactors at the company’s
existing nuclear site in Vogtle, Georgia. With a fair chance of cost
overruns and likely modifications—to fully address the safety
risks exposed by the meltdown at Japan’s Fukushima plant last year
following a devastating earthquake and tsunami—the project
cost could easily end up around $20 billion. This will substantially
increase Southern Company’s leverage and deteriorate its credit
metrics.

Michael Flannelly wrote for The Dividend Daily 14 June 2013,

Jefferies Downgrades Southern Company to “Hold” (SO),

Jefferies analyst Paul Fremont commented, “With the current
investor focus over lower ROEs and cost over-runs at the Kemper
County IGCC plant, Jefferies believes that the stock will continue
to trade at a group average P/E multiple versus its historical 5-15%
premium. Our upgrade was predicated on trading SO at a premium
multiple, so we have revised our price target to reflect our updated
views and believe the stock is fair value at current levels.”

SO’s price when Flannelly wrote that was $44.65 and Jefferies set
a target of $46, or projected upside of about 3%.
SO is $43.33 as I write, which is down about 3%, or almost 6% from
Jefferies’ target.

Georgia Power and SO can
keep dragging their feet on solar and wind

like the telcos did about packet switching
and be outflanked by upstarts like SolarCity (SCTY).
Or they can

get on with what Georgia Trend just noted everybody wants them to do.

-jsq

Disclosure: I own both SO and SCTY, as I mentioned to SO CEO Tom Fanning
back at the May stockholder meeting (when SO price was $46),
although not for the entire period since then.