The dominant financial consideration
is “what’s going to happen with Georgia”,
meaning with nuclear Plant Vogtle,


said SO CEO Tom Fanning, referring to

the GA PSC CWIP monitoring hearings currently in progress.
Meanwhile, that
$160 million estimate 2 July 2013 of more Kemper Coal cost overruns
by 30 July turned into
$278 million after taxes (AP).

This is on top of

$333 million after taxes in May.
SO earnings fell 52% (WSJ), missing projections, and SO stock dropped 2% yesterday.

Remember GA PSC Tim Echols

already suggested a Plant Vogtle cost overrun cap
similar to the one Mississippi PSC applied to Kemper Coal that caused
SO to have to eat all those costs.
If that happens, SO’s got financial problems.

Has SO seen the solar light yet, as in reliable, dependable, and deployable
on time and on budget?
Nope.
Solar was tacked onto the end of

Tom Fanning’s summary of interesting stuff
in the 31 July 2013 earnings call:

So that’s positive. We’ve made a huge shift away from coal to gas to
where we used to be 70% energy from coal, now we’re 45% with gas.
we’re the third largest consumer of natural gas in United States. We
have extended our reach either through ownership or through
contracts with now about 1,200 megawatts in about the last 12 months
in terms of renewable, that’s for procuring wind energy and either
procuring solar, or owning solar. When you consider that plus what
we’ve already been doing in terms of energy efficiency. It’s easy
for me to say that it would be hard to find somebody that’s doing
more in terms of kind of handling the GHG issue in a very practical
— both tactical and strategic way.

That’s right, he’s taking credit for

the 525 MW of solar power GA PSC forced Georgia Power to acquire.
But he ranks it below natural gas for dealing with GHG, i.e., Greenhouse gases,
i.e., climate change. Nevermind natural gas is methane which when
it leaks is much worse than CO2 as a greenhouse gas.

SO CFO Art P. Beattie provided a suummary of Kemper Coal charges:

For the second quarter of 2013, we earned $0.34 per share compared
to $0.71 per share in the second quarter of 2012, a decrease of
$0.37 per share. For the six months ended June 30, 2013, we earned
$0.43 per share compared to $1.14 per share for the same period in
2012, a decrease of $0.71 per share. Our results for the second
quarter 2013 include an after-tax charge against earnings of $278
million or $0.32 per share related to the increased cost estimates
for construction of the Kemper project. Recall that for the first
quarter of 2013, we announced a similar after-tax charge of $333
million, or $0.38 per share. This brings the total of after-tax
charges related to the Kemper project to $611 million or $0.70 per
share for the six months ended June 30, 2013.

Then Beattie blamed record Q2 2013 rainfall in Georgia and Alabama:

While this lower temperatures and contributed negatively to our
earnings, it also enabled us to increase hydroelectric generation by
more than 400% compared to the second quarter of 2012.

That’s right, Southern Company lost money because you didn’t have to
run your air conditioner as much.

Here’s another financial risk of Kemper Coal:

Paul Patterson – Glenrock Associates, LLC

First of all, if the Kemper schedule for coming online slips past to 2014 spring deadline, what happens to the deal we subsidy? Is there any risk there or…

Thomas A. Fanning

Well, you lose them.

Paul Patterson – Glenrock Associates, LLC

You lose them for sure?

Thomas A. Fanning

You lose ITC.

Paul Patterson – Glenrock Associates, LLC

Okay.

Thomas A. Fanning

Not the deal DOE stuff, I’m sorry. So, the $133 million investment tax credit is what you would lose, I’m sorry I thought you were referring to

Paul Patterson – Glenrock Associates, LLC

Okay

But on to Plant Vogtle:

Paul Patterson – Glenrock Associates, LLC

Okay, and then just in terms of long-term EPS growth and I know this
is, I think Ali and Greg were asking about this. Just to understand
this, I mean you did mention that it’s a regulatory year obviously,
things with Kemper didn’t work out exactly as we had previously
expected, is the 4% to 6% growth I know that you guys usually
address this in the fourth quarter. But I mean, you did mention to
Paul Ridzon that you were sort of reiterating the guidance when
asked in terms of 2013, in terms of your confidence. How should we
think about your confidence for the 4% to 6% growth in January, if
you could just elaborate a little bit more on that just in terms of
how do you feel about that given all the stuff that’s been
happening?

Thomas A. Fanning

Well, yeah, I think, I would say what I said before, I appreciate
you asking again. The most dominant thing is what’s going to happen
with Georgia. The second most dominant thing is what’s going to
happen with Georgia. The second most dominant thing is what’s going
to happen with Alabama. I think we’ve separated out the effects of
Kemper, $0.015 this year, $0.025 independent, $0.04 in the aggregate
next year, et cetera. I mean, we’ve been through that. So my view
is, I’m just a little reluctant. I guess, what I’m saying is our 4%
to 6% remains until I see a reason to change it, and I’m not going
to change it until I see what happens with these regulatory calendar
that we have in front of us in 2013.

SO already got downgraded again

16 July 2013 by a SeekingAlpha Equity Watch investor:

I believe the uncertainties concerning pending rate cases and
ongoing development projects poses a risk to future financial
performance of SO and hence for the stock price. Therefore, I
recommend “hold” rating on the stock.

Who will downgrade SO next because of this latest Kemper Coal writeoff?

Could it be Goldman Sachs?

Michael J. Lapides — Goldman Sachs & Co.

Hey, Tom, just a follow-up on Vogtle, real quick. I want to make
sure I understand the stipulation you guys signed today.

Thomas A. Fanning

Yeah.

Michael J. Lapides — Goldman Sachs & Co.

Every six months, will you all simply go in and ask for approval of
the money you spend the prior six months on the plant and you won’t
come in and give the commission an update on here is what we expect
the total plant costs to be overall meaning till the end of
construction or will that last data point still be given to the
commission?

Art P. Beattie

Yes. You know, this is…

Michael J. Lapides — Goldman Sachs & Co.

No, it’s Michael, I’m sorry.

Art P. Beattie

I’m sorry, Michael, I forgot. The way we think about it is there
will still be communications with the commission about total costs.
And we’ll still file those projections with them, but the actual
approval will come in each of the six-month processes as Tom has
described.

Thomas A. Fanning

That’s right.

Michael J. Lapides — Goldman Sachs & Co.

Got it.

Art P. Beattie

And all that, Michael, you should know was hand in glove, we have an
independent evaluator. It’s exactly the processes that we’ve been
following so far through VCM 1 through 7 and the process we’re
following now with the exception we are not going to do the
recertification, with a 5% cost figure includes.

Michael J. Lapides — Goldman Sachs & Co.

Got it, okay. So, it’s strictly not having to go through the formal
process of getting commission approval, but they will still be the
disclosure in the public domain about whether the cost has gone
down, due to construction or due to lower financing costs or whether
— kind of your long-term projection of the total plant cost?

Art P. Beattie

That’s correct.

Michael J. Lapides — Goldman Sachs & Co.

Okay. Thank you, guys.

Thomas A. Fanning

Thank you, Mike.

That sounds like investor-speak for Goldman Sachs doesn’t believe Vogtle costs
will meet SO’s total estimates.

Forbes ranks
Goldman Sachs

VP Michael Lapides
#3 among stock pickers in Multi-Utilities.

Maybe we the public should watch those total estimates closely to see
how much they slip.

Dear Tom Fanning,

It’s time to stop being

tepid and timid and living in the past of thermal generation,
whether coal, natural gas, or nuclear.
You can lead the southeast and the country and the world into
distributed wind and solar generation.

-jsq