Southern Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

Key Takeaways

  • Southern Company’s Plant Vogtle Unit 3 achieved commercial operation, adding over 1,100 MW of 24/7 carbon-free electricity; Unit 4 remains on track for service between late Q4 2023 and Q1 2024.
  • Q2 adjusted EPS of $0.79 topped estimates by $0.04 but declined $0.28 year-over-year, weighed down by historic mild weather, higher depreciation and interest expenses.
  • Management set Q3 adjusted EPS guidance at $1.30 per share and emphasized disciplined cost management alongside safety, reliability and customer satisfaction priorities.
  • Retail performance was steady with year-to-date normalized sales matching 2022 levels, driven by strong residential and commercial demand; nearly 24,000 new electric and 13,000 gas customers were added.
  • The company placed #9 on Forbes’ America’s Best Employers for Women list, underlining its commitment to diversity and an inclusive work environment.
AI Generated. May Contain Errors.
Earnings Conference Call
Southern Q2 2023
00:00 / 00:00

There are 12 speakers on the call.

Operator

Good afternoon. My name is Tommy, and I will be your conference operator for today. At this time, I would like to welcome everyone to The Southern Company Second Quarter 2023 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

As a reminder, this conference is being recorded today, August 3, 2023. I would now like now to return the call over to Mr. Scott Gammel, Vice President, Investor Relations and Treasurer. Please go right ahead, sir.

Speaker 1

Thank you, Tommy. Good afternoon, and welcome to Southern Company's Q2 2023 earnings call. Joining me today are Chris Womack, President and Chief Executive Officer of Southern Company and Dan Tucker, Chief Financial Officer. Let me remind you, we'll be making forward looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward looking statements, including those discussed in our Form 10 ks, Form 10 Q and subsequent filings.

Speaker 1

In addition, we'll 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 Chris Womack.

Speaker 2

Thank you, Scott. Good afternoon and thank you for joining us for what is such a pivotal and exciting time for our company. As many of you know, on Monday, we announced that Plant Vogtle Unit 3 successfully achieved commercial operation. While work remains to bring Unit 4 online, this incredible milestone is something to be celebrated. This decade plus journey, which involved developing a global supply chain, managing through a global pandemic, Tens of 1000 of American craft workers and engineers and millions of labor hours combined with a group of committed co owners and regulators that had the courage to support new nuclear power as an option when others didn't proves that we can accomplish monumental things when we share a common vision.

Speaker 2

Vogtle Unit 3 is now serving Georgia customers with over 1100 megawatts of 24 hour, 7 day a week carbon free electricity. Turning now to Unit 4. Since our last call, the project team continues to make substantial progress as highlighted by completion of hot functional testing, receipt of all 157 fuel assemblies, submittal of all ITACs and most recently receipt of the 103 gs finding from the Nuclear Regulatory Commission signifying that license acceptance criteria for Unit 4 have been met. The project team's current focus is on working through final testing and system turnover 2 Operations that when complete will allow fuel load for Unit 4. Recall, as we contemplated in the VCM-seventeen order, Georgia Power can file its prudence request with the Public Service Commission following fuel load on Unit 4.

Speaker 2

Following fuel load, The project team will conduct final preparations and testing of systems primarily associated with the electrical power production side of the plant and achieving the pristine conditions in the nuclear island necessary for start up activities and initial criticality. Importantly, The project capital cost forecast is unchanged since last quarter, and we continue to project Unit 4 would be placed in service between late Q4 2023 and the end of the Q1 2024. The successful completion of this important project is Critical for Georgia's and our nation's energy future. We look forward to these units providing reliable, Carbon Free Energy to Customers for decades to come. Dan, I'll now turn the call over to you for a financial update.

Speaker 3

Thanks, Chris, and good afternoon, everyone. For the Q2 of 2023, our adjusted earnings were $0.79 per share, $0.04 higher than our estimate and $0.28 lower than last year. The primary drivers performance compared to last year were milder than normal weather conditions, higher depreciation and amortization and interest expense and changes in rates and pricing, somewhat offset by lower income taxes and O and M expenses. A detailed reconciliation of our reported and adjusted results as compared to 2022 is included in today's release and earnings package. Weather in our electric service territories during the first half of twenty twenty three has been the mildest on record with the fewest aggregate degree days in the 129 year history of climate data reported by the National Oceanic and Atmospheric Administration, more commonly known as NOA.

Speaker 3

The negative $0.16 per share EPS impact relative to our weather normal EPS guidance range is our largest ever negative weather driven variance for the 1st 6 months of the year, which is a significant headwind for the full year. While 2022 was a year in which we were able to fix the roof while the sun is shining and position the company well coming into 2023. We have been and will remain keenly focused on cost management along with our constant focus on safety, reliability and customer satisfaction in the second half of this year. Our adjusted earnings estimate for the Q3 of 2023 is $1.30 per share. Turning now to retail sales and the economy.

Speaker 3

Year to date 2023, whether normal retail sales were in line with sales levels for the first half of 2022. We've seen positive residential and commercial growth and strong commercial usage offset by lower industrial sales. Year to date. We've added nearly 24,000 electric customers and 13,000 natural gas customers, trends, which continue to outpace pre pandemic levels. Chris, I'll now turn the call back over to you.

Speaker 2

Thank you, Dan. In closing, I'd like to take a moment to acknowledge that Southern Company was recently awarded the number 9 overall spot on Forbes ranking of America's Best Employers for Women, the highest ranking within our industry. We are honored to be selected to this list once again. Workforce and leadership diversity is a tenant of ours and ensures we have the variety of experiences and perspectives to better serve our customers. We will continue to emphasize a culture where all employees feel valued, respected and able to accomplish their professional goals.

Speaker 2

Thank you for joining us this afternoon and for your interest in Southern Company. Operator, we are now ready to take questions.

Operator

Thank you very much. And we'll proceed with our first question on the line. Is from Shahriar Pourreza from Guggenheim Partners. Please go ahead.

Speaker 2

Shahriar, good afternoon. Hey, guys.

Speaker 4

Chris, that was the world record for the fastest prepared remarks. So congrats there on that one. There you go.

Speaker 2

I always appreciate your comments and your analysis.

Speaker 4

Thank you. Just starting on Georgia's economic backdrop, obviously, you guys have seen a step change in the pace that major industrial customers have been announcing new capacity needs. How many, I guess, new gigawatts are you seeing now in Georgia versus the prior update with the state. What is the prior IRP embed? How should we start to think about any updates to capacity needs, including the viability of the remaining coal assets as you're thinking about this incremental demand.

Speaker 4

So could we see a drastically different IRP being filed? Thanks.

Speaker 2

And Shar, we're working through that analysis now. I think we have said to you before and we've commented about All the wonderful economic development activity that we've seen across the state of Georgia over the past couple of years, some 250 plus projects, some $20 plus 1,000,000,000 of investment, some 60,000 jobs that I know the governor has reported. So I think we've talked about the impressive activity that we've seen. We've not turned that into the capacity needs at this time. That's some work that we're doing.

Speaker 2

And I'm sure forthcoming, we'll work with the commission on what all that means and then figure out what it means for us in terms of capacity needs going forward. But I think a little bit premature.

Speaker 3

Just quarter of magnitude. Got it. Again, we're kind of going through the analysis, but it's fair to say What we've seen from an economic development announcement perspective in the past is 100 of megawatts at a maximum in a given year and now we're having instances where it's 1,000 potentially in terms of the announcements. And so just the pace has accelerated. And you mentioned industrial.

Speaker 3

There's certainly a lot of large industrials involved with that, particularly around the electric transportation sector, but it's also data centers. It's a story that's playing out in a lot of places. Just as an example for ours. I mean, as we sit here today, data centers are roughly 2.5% of our overall electric load. 5 years from now, that will be well into the double digits in terms of percentage of our load.

Speaker 3

That's the pace of growth we're seeing.

Speaker 2

So, John, the bottom line is go ahead. No, I think something we're very excited about. No, we're very excited about it. I think it's a real positive contribution, positive factor that we're excited about here in the state.

Speaker 4

Do you have a sense, Chris, on when you and Kim and Dan and the team could update us around that potential opportunity? I know it's really early in the process, but we're obviously seeing the amount of customers that are moving to Texas and it's very material. So I mean to Georgia, which is really material. So I'm I'm curious on what the timing of that could be.

Speaker 2

Yes. Sure. I think it's a little bit premature. But as soon as we get to that point and We figure out and have conversation with the commission. I'm sure we'll share that with you, share that with the industry.

Operator

Okay, perfect.

Speaker 4

And then lastly, Chris, we're obviously approaching the prudency case once we see Unit 4 fuel load. Anything you can provide on how we should be thinking about a potential settlement or this should we be thinking about this as like a rate case? And whether the potential for like a special election could impact the process, if at all, especially if fuel load takes longer than planned.

Speaker 2

Yes. Charles, I think there are a couple of questions you embedded there together. First, around prudence, we have to get the fuel load. Once we get the fuel load, we'll figure out What happens, having transparency in the process is very important. But right now, Once we get the fuel load, then we'll figure that out.

Speaker 2

We'll work with the commission and the staff on that process. I think you made reference to the makeup of the commission. I mean, the sense is that we'll get through prudence with the current commission. We have no idea what will happen in the Rose case. So we're still waiting for that order and for that decision by the courts, but There's nothing more I can say about that decision at this point in time.

Speaker 4

Okay, perfect. Thank you, Chris and Dan. Very helpful. I appreciate it and congrats.

Speaker 2

Thank you. Thanks, Shar.

Operator

And we'll get to our next question on the line. It is from Carly Davenport with Goldman Sachs. Please go ahead.

Speaker 2

Hey, Carly. Hey, Carly. How are you?

Speaker 5

Doing well. Thanks so much for taking the questions today. I appreciate it. Maybe just starting in terms of what we saw during the quarter for weather normalized demand, a little bit weaker on the industrial side, but commercial still looks quite strong. Can you just talk about how things are evolving relative to your forecast and kind of How you can see that evolving as we continue to move through the year?

Speaker 3

Yes, absolutely, Carly. And we saw this earlier this year as well. From an industrial perspective, we're seeing 2 different dynamics play out that are negatively impacting growth. And those one is the housing sector. So when it comes to things like lumber, stone clay and glass, to a degree, textiles, particularly where it involves carpet, Just given the broader trends in the housing industry, we're seeing that impact some of our usage in the short term.

Speaker 3

And then the other thing is chemicals from an industrial perspective. So we've had one particular facility in Alabama that has slowed pretty significantly. Again, some of that was anticipated very early in the year and so it's just playing out as we anticipated, just wasn't anticipated when we kind of put our forecast together right before the end of the year. What We're really encouraged by is what we're seeing on the commercial and residential side. I spoke to the customer growth that we're seeing from a residential perspective.

Speaker 3

Again, we've seen sustained levels well above what we were seeing pre pandemic. And from a commercial perspective, just a lot of different worries playing out in that regard. Some of it's economic development, some of it's just data center dynamic that I mentioned. And certainly a lot of it is just commercial naturally following the residential growth. As it pertains to how it's impacting our results, What's important to remember is kind of the revenue contribution of these two classes on a relative basis.

Speaker 3

A 1% change and industrial sales is only about $20,000,000 of impact, whereas a 1% change in residential and commercial is more like $40,000,000 to $50,000,000 So in terms of a net implication for us, we're getting the benefit of the residential commercial more than offsetting what we're seeing on industrial.

Speaker 5

Got it. That's super helpful. Thank you. And then maybe just on the financing front in the context of of the current rate environment. Just you've got some financing kind of still outstanding for the rest of this year.

Speaker 5

Just how are you thinking about execution of the plan that you have as we move through 2023?

Speaker 3

Yes, Carly. Look, we're always going to kind of keep our options open, the flexibility you've seen us do the convertible debt instrument early this year. We typically lean on an ongoing basis towards just senior unsecured stuff for the parent, lot of different instruments we've used across the utility franchises. I wouldn't characterize anything in our plans as out of the ordinary. We're going to be monitoring the market and making sure we're being thoughtful about, as we always are, maturities about the mix between fixed and variable and like everyone's doing, monitoring the rates as actively as we can to make sure we're getting to the market when it makes sense.

Speaker 5

Appreciate the color. Thank you.

Speaker 3

You bet, Carley. Thank you.

Operator

And we'll get to our next question on the line. It is from Julien Dumoulin Smith with Bank of America. Go right ahead.

Speaker 2

Hey, good afternoon, team.

Speaker 6

Thanks for the time. Hey, great. Thanks so much. Really appreciate it. Hey, look, just coming back to the other subject here on procurement and renewables on the renewables front.

Speaker 6

I know we talked about this last quarter here, curious to hear your latest thoughts both on the utility side and ownership. I think that had always been kind of back after this year. How is that looking on that front in Georgia. And then separately, I think, Dan, last time we connected here, you were talking about the Southern Power effort looking like it was a tad bit more competitive in this environment, in terms of your ability to actually win and accrue projects on that side of the house. Do you want to talk about some of the progress and maybe the evolution just with the rate environment where it is?

Speaker 2

Yes. Julian, let me start with the on the renewables front. As you know, in the 'twenty two IRP, Georgia had another 2,100 megawatts of renewables approved during that proceeding. The first IRP would begin later this year, targeting some 1300 Megawatts Renewable Resources with operation dates between 2627. I think you may have also seen Alabama Power, got its renewable generation certification modified some 2,400 Megawatts over a 6 year period.

Speaker 2

So I think that will also be later this year. So We're proceeding and we're looking forward to opportunities for us to own some renewables. Clearly, we'll take advantage of normalization of tax treatment between PTCs and ITCs and pursuing it from a best cost perspective. And we think we've got support from our commissions for us to own more renewables. So we're looking forward to those processes as they proceed later this year.

Speaker 2

I think your other question, Dan, you want to talk about pricing?

Speaker 3

Well, I think the other question was around Southern Power. Yes, it will. And yes, Julian, the same continues to hold true. The radar screen of active viable opportunities for Southern Power is as strong as it's ever been. And Look, we fully expect to be able to continue to deploy capital in the right way there.

Speaker 3

We'll keep the same discipline we've always had in terms of the hurdles we look for, the risk profile, long term contracts, creditworthy counterparty. But I think my short message there on Southern Power would just be stay tuned. There's good things happening.

Speaker 2

So bottom line, Julian, I think we're very Mystic on the regulated side of what the future holds for Renewables and we'll see how that plays out begin to play out later this year.

Speaker 6

Got it. Excellent. And then just as you think about the generation needs that the prior questioners have been really kind of poking at here, aligned with, as you alluded to a second ago, the added ability to own some of this renewable generation through utility tax credit optimization, if you will. Can you talk about that opportunity coming together and maybe specifically the timeline that you could see that starting to play itself out. I know we just alluded to the prior RFP cycle, but getting that the CapEx proposals, RFPs and ultimately just seeing that load forecast updated.

Speaker 2

Yes, Julian, once again, I think it's a little premature In that regard, clearly, as I spoke to you earlier about the renewable process and the RFPs, we see that forthcoming later this year. Clearly, we've got some more work to do as we analyze the implications of this second item development activity and what it means for loads. And so we simply right now need to let the RFP process play out over the next few months and next few years. But you'll we'll keep you updated as we move through the process.

Speaker 3

Yes. As we've said before, consistent to what Chris just said, This will come together from a plan and capital deployment perspective in the latter part of our Gas Horizon. So it's not a 2023 thing in terms of capital deployment, might but probably not meaningful 24, But beyond that is where the real opportunity exists. And the other thing that's coming together to help drive this, and I think you mentioned the economic development aspect, Julian. As all these customers are choosing to locate in our service territories, they are increasingly demanding to be served with renewable generation and that's just helping support everything we're trying to do.

Speaker 6

Yes. I hear you. Wish you guys best of luck and hope to see you guys soon, all right? Take care.

Speaker 2

All right, Julien.

Operator

Thank you very much. We'll get to our next question on the line. It is from Jeremy Tonet with JPMorgan. Go right ahead.

Speaker 4

Hi, Jeremy.

Speaker 2

Hi, good afternoon. Good afternoon. Thanks.

Speaker 7

Just want to see, I guess, with turn off Vogel here. Some of the issues at the finish line here, just wondering what learnings you take away from that? And do you see The same type of issues materializing for Unit 4 or they're wearing the tears that can kind of head off any issues like that?

Speaker 2

And Jeremy, one of the things we've commented for, we said it probably for a few years now that, There would be lessons learned that we transfer over from Unit 3 to Unit 4. Let me give you some examples of how that is playing out. Unit 3 hot functional testing took 94 days. On Unit 4, it took 88 days. From 94 to 42 days.

Speaker 2

Hot functional testing to complete to 103 gs was 371 days on Unit 3, 88 days on Unit 4. And from coal hydro to hot functional test start was 191 days on Unit 3 to 103 days on Unit 4. So I think you're seeing clear examples of how Lessons are being learned from Unit 3 over Unit 4. And that work, those lessons learned will continue, I think, to show itself as we move through Unit 4.

Speaker 7

Got it. That's helpful there. Thanks. And just kind of pivoting here, I think I saw that the DC Corp overruled FERC's approval of the Southeast Energy Exchange Market. Just what do you make of this year and what's the path forward?

Speaker 2

Yes. I mean, it remanded it back to FERC to clarify a couple of issues around the power pool and there were some questions about who could participate in seeing and seeing there has to be interconnections. So I think they're simply remanded back for clarification of a couple of issues, but nothing big there. I mean, SCENE continues to operate and perform very well. Everybody's Very pleased with the results of Seam.

Speaker 2

So it will be it's going to be remanded back to FERC, like I said, with a couple of issues that they'll clarify for Seam going forward.

Speaker 7

Got it. That's helpful. Thanks. And just last one, if

Speaker 8

I could. What are you

Speaker 7

expecting on hydrogen regs from treasury? And What do you think Southern Power's potential to participate could be with Vogtle, the potential for green hydrogen here?

Speaker 2

Let me say something quickly about hydrogen and I'll let Dan touch on any rules from Treasury. We're participating in number of processes DOE has with Hydrogen Hub. So we're excited about that. As you may recall, we did a 20% blend at our Platt McDonough gas site. So we're excited about all the technology activity and the considerations that are going on around hydrogen.

Speaker 2

We look forward to seeing if we can develop this market, get the pricing right, get the transportation of the product right and then we can find off takers. I mean, so we're thrilled by the possibility and how Vogtle can continue to serve customers in Georgia. So There are a lot of aspects of hydrogen that we get really excited about. Clearly, there's a lot of work that's got to be that we got to work through to get to that point to make it commercially viable.

Speaker 3

Yes. And Jeremy, in terms of the treasury rig, certainly, Like most in the industry, I think for us it makes sense that those are as broad as possible going in to help kind of drive the deployment of the technology. Otherwise, it just may be cost prohibitive for a lot of people to get it out there. And whether that's a permanent Broadness or it's a temporary broadness that transitions to something more specific. I think that's going to be in the hands of the Treasury Group.

Speaker 3

In terms of Southern Power's opportunity to play there, certainly Southern Power's wheelhouse is providing utility scale Renewable Generation to counterparties. And to the extent that we find opportunities in this space to serve electrolyzer or another entity with a long term contract and it's a creditworthy counterparty and it meets all of the same criteria, It certainly expands our universe of opportunities.

Speaker 7

Got it. That's helpful. I'll leave it there. Thanks.

Speaker 2

Thank you.

Operator

And we'll get to our next question on the line. It is from David Arquero with Morgan Stanley. Go right ahead.

Speaker 2

Hey, Dave. How are you, David?

Speaker 8

Hey, doing well. Thanks for taking my questions. Wondering if you might be able to touch a little bit on Form Energy. You had an agreement reached at Georgia Power this quarter. I was wondering how you're thinking long duration energy storage might play a role in your system over time?

Speaker 2

Once again, we're excited about the relationship that we've established with Forum. We have utilized the kind of 4 to 6 hour batteries, but we think a 100 megawatt 100 hour long duration storage battery, some 15 megawatts has got to be a part of the mix and has got to be a part of the system and the grid going forward. So we're excited about what Forum is doing. We were at their ground breaking ribbon cutting up in West Virginia a month or so ago. So we are excited about Forum and looking forward to their development as we go forward.

Speaker 2

But we think this has got to be part of the technology mix as we go forward and we're hoping they're going to be successful. As you know, we pay a lot of attention to research and development. And we think as we look at a lot of solutions, whether it's emissions control or just making sure we maintain a reliable and resilient grid. We think technology advancement is very, very critical. And so We're excited about the work that Forum is doing and we're glad to partner with them.

Speaker 8

Great. That makes sense. And then secondly, obviously a big weather headwind that you're working through. And could you touch on the cost control, Just your confidence level in being able to manage and find flex in your O and M budget for this year and where are the key areas that you're looking at in terms of offsetting the headwind so far.

Speaker 2

Yes. I think and Dan said it in the conversation early on that we'll remain keenly focused on Cost Management. And so we know the weather we've seen is unprecedented, is the lowest, the warmest we've seen in history. And so we've got to correspond with that with similar focus on cost management. And so there are a number of efforts going on across the company to make sure that we are executing around cost management controls.

Speaker 2

And right now, we feel good about kind of where we are, but we know we've got a lot more work to do as we go forward through the rest of the year.

Speaker 8

Okay, understood. Congratulations on what was Unit 3 and thanks again. Appreciate it.

Speaker 2

Thank you very much.

Operator

Thank you. We'll get your next question on the line. It is from Gurga Chopra with Evercore ISI. Go right ahead.

Speaker 9

Hey, good afternoon, Dan. 7 minutes and 58 seconds of prepared remarks. I'll keep it real brief hopefully. Just following up on David's question. So this quarter, we had $0.04 of unfavorable weather versus normal, but you actually delivered $0.04 higher than your estimates.

Speaker 9

Is that all just cost cuts or are there other things that we should think about one time more than other things.

Speaker 3

Yes. It's primarily cost reductions, Durgesh. I mean, there's always some little puts and takes here and there that are a little different than our forecast. But overall, it's just the fruit of our labor. And and kind of going back to Dave's original question in terms of where, frankly, be doing a disservice to highlight any particular area of the business where we're doing that because we're doing it everywhere.

Speaker 3

This is a significant lift and we're doing everything we need to do and pulling out all the stops to deliver.

Speaker 9

Okay, solid. And then just maybe if you can, otherwise I'll just follow-up with Scott. Just any sort of initial takes on July weather?

Speaker 3

It hasn't looked like the first half.

Speaker 9

Okay. Thanks so much. Appreciate the time.

Speaker 2

Thank you.

Operator

Thank you very much. We'll get to our next question on the line is from Nick Campanella from Barclays. Go right ahead.

Speaker 10

Hey, everyone. Thanks for taking my questions. Hope you're doing well and congrats on the Unit 3 news.

Speaker 2

Thanks, Dave. So I can

Speaker 10

Yes, absolutely. So just looking forward to Unit 4 soon and then knowing that we're getting closer to that $700,000,000 uplift that you detailed in slides here on the CFO. Dan, maybe you can just remind us your preferred use of those cash flows as you roll forward your plan in the Q4. And I know we talked about improving balance sheet in the past, but I'm also cognizant you're talking up a lot of different CapEx opportunities in your region.

Speaker 3

Yes, and thanks for that question. It really is kind of all of the above strategy, if you will, in terms of the opportunity to use this cash. And it's the 3 things that we're primarily focused on. You said, 1, which is to fund the capital plan, right? So will be positioned as we had been historically kind of pre penalty ROEs and heavy construction on Vogo 34, where our operating cash flow represents over 3 times the size of our common dividend.

Speaker 3

And so that leaves an awful lot of cash flow to deploy against this capital plan that we expect to continue to grow. So that's thing 1. The number one priority of the things we're focused on, you also mentioned this, is credit quality. And what this does is provide an uplift to our credit metrics such that we're more in the 17%, 17% plus range for FFO to debt. And The opportunity there is not to raise it to these levels well above our thresholds and then use that as some sort of currency to do things.

Speaker 3

That's the opportunity to just once again get back to being a premium credit utility and maintaining that position for the foreseeable future. So that's the thing 2. And then the third thing that we've talked a lot about is the opportunity that we'll have as our payout ratio gets kind of sustainably at or maybe a little below 70%, so call that maybe 2024, but more likely 2025 an opportunity to go to our board and for Chris and I to make a recommendation to increase the rate of the dividend growth to be more aligned with our earnings growth. So it's again all of the above, but really important things that this enables us to do.

Speaker 7

All right. Thanks for that. That's it

Speaker 10

for me today. Appreciate it. Thanks, Dave.

Speaker 2

Thank you.

Operator

And we'll get to our next question on the line. It is from Angie Storezinski with Seaport. Go right ahead.

Speaker 2

And how are you?

Speaker 11

Very good. Thanks. So just you guys have been in this combat mode for the last well, for a decade almost, it feels like. And I know that there's still the prudence review ahead of you, but I'm just trying to fix your Southern in back to basics mode. So I mean, what does it even look like?

Speaker 11

So that's 1. And number 2 is, I mean, you clearly the stock has rerated somewhat. What is it that you think you can do well, besides just putting Unit 4 online to further re rate the stock from here.

Speaker 2

And Andrew, let me start with the first part of your question in terms of being in combat mode during this Vogtle period. I'd say we're going to stay in comeback mode in terms of execution. Yes, hopefully, we're going to be a little boring. We think boring is beautiful, but we're going to be incredibly aggressively focused on customers being at the center of everything that we do, focused on the circle of life, making sure we maintain a constructive regulatory environment, providing world class service and using your language of in combat mode, but doing that in a very aggressive way that make sure we're giving customers what they need from a reliability, but also a resilience Resilience Perspective, but also making sure we're paying attention to issues around affordability. So we have a lot of work to do.

Speaker 2

And so we're going to be very singly focused on execution. And I think that's going to be very important as we also make the case that we deserve that premium valuation and returning back to the days of old Southern Classic.

Speaker 3

Yes. It is no mistake and no accident. The first page of our deck has circle of life on

Speaker 11

Okay. And then just maybe a smaller point, but you guys have, just like everybody else, more violent and impactful storms going through your service territory. Is there Anything from one investment perspective to regulatory setup that could help hardening the grid and also assure timely recovery of any costs associated with those with the climate change basically.

Speaker 2

And I would say, I mean, if you look at our capital budgets today and getting past both, there are no really large projects, but it's a lot of blocking and tackling with transmission distribution, with grid improvement programs, with undergrounding, with changing our circuits and improving technology, scale systems. So a lot of that work to enhance and improve reliability, but also improved resiliency, so that storms are more different, paying attention to more extreme weather. So doing the basic work to prepare for these kind of conditions and help us to maintain our focus on reliability and resiliency of our system.

Operator

Thank you very much. Thank you, Andy. And that will conclude today's question and answer session. Sir, are there any closing remarks?

Speaker 2

Hey, once again, let me thank everybody for your calls today. It's a wonderful time for Southern Company as we Broad Unit 3 Commercial and with the progress that we're making on Unit 4. And we'll continue to press ahead and move forward. But again, thank everybody for joining us today. Thank you very much and everybody be safe.

Operator

Thank you, sir. Ladies and gentlemen, this concludes The Southern Company's Q2 2023 earnings call. You may now disconnect and have a great rest of the day.

Powered by Quartr