The Southern Company ($SO)

Good afternoon. My name is Christine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Power First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Greg MacLeod, Director of Investor Relations. Please go ahead, sir.

Thank you, Christine. Good afternoon, and welcome to Southern Company's First 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-Q and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call, which are both available on our Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Chris.

Thank you, Greg. Good afternoon, and thank you for joining us today. As you can see from the materials that we released this morning, we reported adjusted earnings results for the first quarter above our estimate, with year-over-year growth reflected across all our major businesses. That performance reflects premium execution and the strength of our strategy to serve the phenomenal growth we're seeing across the Southeast with reliable and affordable energy while delivering durable long-term value for shareholders. We continue to see extraordinary growth and economic development opportunities as our service territories attract investment, people and jobs at a pace few regions can match. As we previously highlighted, a substantial portion of this growth is driven by projected demand from large loan customers. The demand for power across our electric service territories has culminated in 23 gigawatts of contracted or latent stage loan. In just the last 2 months, we have signed contracts for another 1.9 gigawatts of customer load with high credit quality hyperscalers bringing our fully contracted large load agreements to more than 11 gigawatts across our electric subsidiaries. These bilateral negotiated agreements are structured so that customers driving incremental demand, cover the full share of the cost to serve them, helping to ensure this growth benefits all customers. We continue to execute on our plans to serve growth and our straightforward approach protects existing customers. We invest in line with demand to serve growth that enables us to deliver regular, predictable and sustainable results while providing meaningful benefits to the customers and communities we are privileged to serve. Southern Company continues to be uniquely positioned to do this because of our scale, our experience and our expertise, all supported by constructive long-standing regulatory frameworks. At Southern Company, we are capitalizing on transformative growth opportunities, while delivering energy reliability and rate stability as energy demands grow, with base rates held stable in Alabama and Georgia until at least 2029, along with the recent filing to lower rates in Georgia, associated with the recovery of fuel and storm costs, we are demonstrating the value of this approach. Rate stability for our customers is a purposeful objective supported by our constructive, orderly planning and procurement processes, cost management and thoughtful financing. This same built-for-purpose approach also creates the potential for additional capital investment to serve incremental growth opportunities under established regulatory processes. We have routinely demonstrated as growth opportunities present themselves that Southern Company has the ability to convert these opportunities into value through enhanced operations and grid improving infrastructure investments for the benefit of customers and investors alike. The construction of many of these investments is well underway. In the last 2 months, Georgia Power achieved commercial operations for 2 battery energy storage systems providing nearly 200 megawatts of capacity, representing an important step forward in advancing reliable, sustainable energy solutions across the state. These projects are the first of several resources included within our 10 gigawatt portfolio of approved new generation resources that are in development to power the extraordinary predictive growth in our region, including multiple battery systems and natural gas combustion turbines that are projected to be online later in 2026 and 2027. Before I turn the call over to David for our financial update, I'd like to highlight the recently announced historic $26.5 billion in loan agreements with the Department of Energy that will benefit customers across Alabama and Georgia for decades. As we expect these loans to translate into meaningful long-term customer savings while reducing pressure on our capital market needs, over the approximately 30-year term of the DOE loans. This lower cost financing is projected to generate cumulative savings of $7 billion for customers. David, I'll now turn the call over to you for a financial update.

Thanks, Chris, and good afternoon, everyone. For the first quarter of 2026, our adjusted -- adjusted EPS was $1.32 per share, $0.09 higher than the first quarter of 2025 and $0.12 above our estimate. The primary drivers of our performance for the quarter compared to last year were meaningful customer growth and increased usage, including from data centers at our state-regulated electric utilities. Additionally, increased revenues in our gas utilities and higher energy-related revenues in our unregulated businesses, including Southern Power, were positive drivers in the first quarter. This was partially offset by higher financing costs and milder weather year-over-year compared to the first quarter of 2025. A complete reconciliation of year-over-year earnings is included in the materials we released this morning. Our adjusted EPS estimate for the second quarter is $1 per share. Turning now to retail electricity sales. First quarter weather normal retail electricity sales to all classes were 2.3% higher than the first quarter of 2025. This represents the highest total retail sales growth that we've seen in the first quarter in recent history. In fact, sales to all 3 customer classes were up year-over-year, including residential, where we saw 46,000 new customers added to our system as positive trends and net migration continue. The commercial class grew 4.5% in the first quarter when adjusted for weather bolstered by ongoing growth in data centers. Data center usage saw a material expansion in the quarter, up 42% year-over-year, primarily due to accelerating usage ramps at large load facilities. Industrial sales grew 1.5% with particular strength in several segments, including robust activity at multiple steel manufacturers in Alabama. More broadly, the Southeast continues to stand out as one of the most attractive economic regions in country, driven by a diverse mix of advanced manufacturing, technology and other energy-intensive industries. In the first quarter alone, there were economic development announcements for over $7 billion of capital investment and the creation of nearly 4,000 permanent jobs in our region, including a global biopharmaceutical manufacturing project north of Atlanta, bringing $2 billion of investment and over 300 jobs to Georgia. The sustained high-quality growth reinforces why demand in this region of the country remains strong and visible, underscoring the region's tremendous opportunity for future growth. Outside the Southeast, we continue to see momentum in our gas utilities, including our recently announced Hyundai investment in Illinois that is expected to bring 2,500 jobs and $500 million of investment to the Nicor Gas service territory. As we look ahead, the interest from large load customers in our electric service territories which includes data centers and large manufacturers remain strong with a prospective pipeline of well over 75 gigawatts, and we continue to make incredible progress advancing projects through stages in our large load process to finality with executed contracts. As Chris mentioned, over the past 2 months, Georgia Power signed 2 projects representing 1.9 gigawatts pushing the cumulative amount of contracted large loads to over 11 gigawatts across Alabama, Georgia and Mississippi. These bilaterally negotiated contracts with pricing and terms designed to both protect and benefit existing customers also support our long-term financial outlook. We continue to see incredible momentum and tangible interest of power from large load customers and are in active late-stage discussions for another 12 gigawatts of contracted load through the mid-2030s, an increase of 2 gigawatts from what we shared last quarter. Importantly, roughly 6 gigawatts or half of these late-stage gigawatts are expected to be finalized with executed contracts in the near term. In a little over 2 months, we've seen projects representing 12 gigawatts advancing to the next stage in our large load process. The demonstrated progress we are making in attracting and signing new agreements with large load customers is exciting and continues to drive projected growth in our risk-adjusted load forecast which ultimately helps inform future generation needs and generation requests for proposals or RFPs across our service territory. For example, Georgia Power recently initiated the regulatory process for an all-source RFP to procure 2 to 6 gigawatts of new dispatchable generation resources, including from thermal generation, battery energy storage and renewables that are projected to be in service in 2032 to 2033. Generation procurement through RFPs deliver substantial value to customers and is a testament to the transparent and orderly processes in our vertically integrated state regulated markets with long-range integrated resource planning. To the extent the company-owned resources are selected through Alabama Power and Georgia Power's active RFP processes and ultimately authorized by their respective PSC, these generation investments would represent substantial incremental investment above our current base capital plan. Turning to Southern Power. We are moving forward to add 400 megawatts of additional capacity upgrades through natural gas turbine upgrades and multiple existing facilities in Alabama and Georgia, with commercial operation projected between 2029 and 2031. This incremental investment is projected to add approximately $700 million to our capital plan over the next several years. We continue to evaluate other growth investment opportunities at Southern Power including an additional 300 megawatts of natural gas upgrades as well as other new generation opportunities in both the Southeast and other markets to meet future demand. Before I turn the call back over to Chris, I'd like to provide an update on our financing activities through the first quarter. We continue to proactively address equity needs that support our long -- our strong credit quality and path towards 17% FFO to debt by 2029. Over the last quarter, we sourced an incremental $500 million of equity through our at-the-market or ATM program with forward contracts that settle at our discretion by 2028. Combined with the significant amount of equity previously sourced and including the incremental 700 megawatts of Southern -- I'm sorry, $700 million of Southern Power projected capital expenditures, I mentioned earlier, we project the remaining need for equity or equity equivalents of approximately $1.8 billion through 2030 in support of our capital plan and long-term credit objectives. We are well positioned to continue financing our remaining equity needs in a credit supportive and shareholder-focused fashion. I'll now turn the call back over to Chris.

Thank you, David. Last week, the Southern Company Board of Directors approved an increase of $0.08 per share in our annual common dividend, raising the annualized rate to $3.04 per share. This action marks our 25th consecutive annual increase, and this will now be 79 consecutive years, dating back to 1948, Southern Company has paid a dividend that is equal to or greater than the previous year. Increase in dividend 25 years in a row represents a historic milestone for the company and underscores our focus on premium risk-adjusted total shareholder return and our goal of delivering regular, predictable and sustainable value for our shareholders. We are incredibly proud of our strong dividend track record, which continues to be an integral part of Southern Company's long-term value proposition. As we conclude our discussion today, our first quarter results reinforce a simple point. Our company is delivering. We're off to a strong start in 2026, and that momentum gives us confidence as we continue executing our long-term goals. We're capturing growth, protecting customers and creating long-term value, and we're doing it in a disciplined, predictable way. With that foundation, we have a bright future ahead. Thank you for joining us this afternoon and for your continued interest in Southern Company. Operator, we are now ready to take questions.

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

Just on new nuclear, there seems to be sort of a consortium that's formed with utilities and hyperscalers maybe with some backstop by U.S. government around sort of new AP1000s. And it seems like there could be some views that hyperscalers would be willing to take on some of the cost inflation risk above budgeted amounts, one of your peers kind of highlighted that they wouldn't be surprised if the first deal was announced this year. Can you maybe comment on your views? Is Southern interested? Are you in the consortium? Just, I guess, some thoughts on new nuclear in light of the learning curves of Unit 3 versus Unit 4?

Yes. Shar, a very, very good question. And let me have the offsite say, I am very excited to see all the actions that the Trump administration has taken to support the build and construction of new nuclear. I mean I've said you heard me say it many times with the growth that we see in this country. I think is going to be important that we have make available new nuclear in this country to help them support and meet this demand. I mean the Trump administration, I think, has taken some wonderful steps on the regulatory front. All the conversations that DOE is leading and having today about long lead times for supply chains. All of these issues are matters that we clearly have to address and get our arms around. All of these things can help mitigate risk associated with new construction. As you know, and as said before, Southern Company is not at a place to make a commitment about building a new unit. We're going to continue to share the experiences that we gained from Bubble Units 3 and 4, sharing that here in this country and other places with other industries and other companies that are interested in moving forward, but I'm very thrilled and very excited about the conversations and the commitments and the actions that are being taken, particularly around doing more around AP1000s with a group of companies. I'm glad to see this action and work being taken. Once again, be clear, we're not at a place for Southern Company in terms of making that kind of decision. But it's really exciting and real positive to see the work that's being led by this administration to support the development of new nuclear construction.

Got it. Perfect. And then just on Southern Power, obviously, there are a lot of opportunities there with existing tolling agreements that are going to start to roll off. I guess, have those renegotiation conversations started, but more importantly, are there any sort of conversations being had with potential hyperscalers with those assets, there seems to be more and more interest on the gas side. I'm just kind of curious there what -- how you're thinking about that process?

Shar, I guess I'd say the answer is yes and yes. I mean, we're in the midst of some recontracting opportunities, and we've talked about kind of where we are and what we see in June 2030s. So yes, that work is underway, at the same time with all the activity in the marketplace all across this country, we see there could be opportunities for Southern Power. So yes, they are having those conversations to see what's possible and what's doable. They bring, I think, good construction support and good work that they have experienced all across this company with creditworthy counterparties. And so yes, I mean, there are conversations that they're having all across the sector to see what opportunities kind of fit our profile. Yes, I mean, let me end where I started. To your question, the answer are yes and yes. We're doing both.

Perfect. And then that's -- I would assume this is all upside to your 7% to 8%, you're not embedding any assumption around this.

Yes. I mean, once again, I mean, as we think about upside, Shar, we think about strengthen and durability I mean, how do we kind of add length to our growth trajectory that we've laid out. And things like Southern Power and additional large load projects that we're working on. All those activities could support some additional capital investments, but it brings greater durability to our plan. And so that's kind of how we see all these upside opportunities.

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

So I guess you kind of answered it like what you've announced here, the incremental you see strengthening, lengthening the durability of the 7 to 8 CAGR. I guess just my question is just more on the load side and how you think that's affecting the reg strategy. I guess when I take a step back, you committed to these stay-outs late last year. And since then, you've kind of been making notable progress both on load visibility and usage ramps. So just how is that kind of creating or changing your philosophy around your regulatory strategy when you would actually go in and file again after these next day out? Are you kind of, I guess, ahead of plan on the load and can that crystallize a further stay out for customers?

Yes. Nick, let me start, and I'll see what David wants to add. But I think the focus for us is more about rate stability. And so as we have structured these contracts with large loads to make sure they pay their full share and also making sure from collateral to making sure that from cancellation fees to minimum bills or the terms that we're looking to contract, all of that gives us protection but also it supports our ability to make sure that we're protecting existing customers. And so that gives us the opportunity for this kind of rate stability and freezes in Georgia through '28 and Alabama through '29. So as we do that work, all of that kind of supports -- yes, the regulatory strategy, but more importantly, it supports our commitment to rate stability to our customers and making sure that all of our customers benefit from this growth that we're experiencing. David, anything you want to add to that?

Yes, Chris. Nick, thanks. Great question. When we took this opportunity, we saw the road shaping up where these contracts are coming to fruition. The conversations we were having with these large load opportunities where really the momentum was building and we saw the opportunity to provide long-term stability for our customers, and it has really paid off quite well. These ramps are going exactly as we had thought. The opportunities that we came into with the DOE are further enhancing affordability and stability. Everything is just working out perfectly well with this opportunity and enhancing the benefits for customers.

Nick, does that get your question?

Yes. No, I appreciate it. And would you say just when you set the -- when you made that commitment, are you in line with the plan on your load visibility or ahead of the plan? How would you characterize that, I guess?

We're in line -- and yes, we -- we're focused getting to the top of the range and delivering what we say we're going to deliver. I mean that's one thing you can count on us to do. And so yes, we're delivering. And as we said in the opening remarks, we're delivering on what we said we were going to do. And so as we look at this great start until the start of the year, we're excited about where we are here in '26. But as we look long term, we feel very confident about the plan that we've laid out.

Okay. And then just my only follow-up is just as we think about wrapping in additional capital, I know you've given that sensitivity for incremental equity, but just thoughts on portfolio rotation at this time.

Yes. Nick, it's something that we've talked about regularly. We're always looking around. We are blessed to have the cards that we've been dealt, and we love the portfolio. But if there's an opportunity out there where there's a better buyer, I mean, a better owner of something, we're open to that. And if there's an opportunity for us to get in and buy something, we're open to that as well. It's got to be in the right circumstances, and we're always looking.

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

Let me pick it up where -- hey, let me pick it up or my pal, Nick just left it off here. You've got $850 million of cumulative bill credits you guys have been talking about here. Is there a chance that, that number actually gets revised higher here as you just see this contracted large load number head higher, right? I mean, again, that was a snapshot at a point in time. I imagine you could actually eventually be in a better position here on that point. I think it's partly what Nick was getting after.

Julien, you know we don't get to have our regulators, first of all. But clearly, as we can continue to deliver these contracts in terms of how they're structured and how they drive additional benefits to existing customers and our focus on putting downward pressure on rates and bills for existing customers. We're always looking for those kind of opportunities. And so this deep focus that we have on rate stability and how we're using growth to support rate stability. Clearly, as you laid out, that is a focus of ours. I mean as we talk about and we've signaled that, I mean, Georgia Power is in the middle of strong recovery proceedings along with fuel recovery processes, and how those 2 proceedings can provide benefits and lower bills for customers. That's kind of a major focus of ours as we think about rate stability as we do the work of signing these large load contracts as we focus on growth, as we manage this company, doing all we can to maintain rate stability but find opportunities to put downward pressure on rates for our customers. That is a keen principal focus of ours.

Awesome. Let me follow this up real quickly here because obviously, you're showing continued quarter-over-quarter success at the Southern corporate level on finalizing of contracts, right, as you show in that funnel chart, right, in your slide deck. But if I look at the 4Q '25 Georgia Power large load economic development report, it shows some degree of softening in contracted commitments here. And look, I just want a needle, is there something about Georgia versus your other states, Ala maybe Alabama where there's other states accelerating to offset Georgia. Again, there's a timing element here. Again, there's a lot of different numbers floating around, but I just want to make sure I'm understanding the core message here.

I think it's more about timing, but also, I think, is the other message that we've been communicating that we're seeing this activity migrate to the west as we continue to see increasing activity in Alabama. Yes, I mean, there is some churn in Georgia. But I would say the defies still very hot in Georgia, but we're also witnessing greater activity in Alabama and Mississippi as well. But I think you can also look at that kind of pipeline number still 75 gigawatts that I think reflects kind of all the activity that we see. The churn is more speculative, but I think you ought to continue to see kind of more hyperscale activity across the territory.

Yes, Julien. One thing to think about as well is recall the rules under which we're negotiating these contracts in Georgia and the need for these potential customers to demonstrate their commitment by posting collateral that's really shaking a lot of the potentials out of there that are more speculative in nature and leaving Georgia Power to really work with a high-quality portfolio of potential customers in which we're choosing to contract. So I think what you're seeing really is a refinement of that and not a degradation at all. Actually, I'd maybe characterize it as a strengthening of that portfolio of anything. .

Strengthening in Georgia, nonetheless.

Very strong in Georgia, yes.

100%.

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

Maybe just one follow-up on the upgrade opportunities at Southern Power on the gas fleet. I know you announced some of those today. And then it seems like there's another 300 megawatts on the table. Any sense you could give us on kind of timing and evaluating that opportunity? And is that sort of the extent of the upgrade opportunity you see on the gas fleet at Southern Power?

From an uprate perspective, that really covers the whole fleet, if we work through the rest of those opportunities. In terms of timing, we're working through that, that could be over probably the course of the next year or so. But yes, we set out a plan to explore opportunities to really upgrade each one of the existing generation facilities within the Southern Power Company.

Yes. Carly, that construction is scheduled to begin this year in 2026. So this is kind of kind of very immediate work that's about to -- that will be done.

Got it. Okay. Great. And then maybe just to touch base on Georgia, obviously, 2 seats up on the PSC for election this year. Just curious if you could kind of provide your latest thoughts just on the setup, in terms of the focus areas of the candidates you've heard thus far? And just any views on kind of latest temperature in Georgia around affordability and development?

Yes. So as you know, I mean, there's -- their primary elections on May 19, if they are runoffs. They will be June 16. So yes, there's a lot of conversation that everybody is on the campaign trail, a lot of conversations about data centers and large load customers and things like rate stability. So I mean, all of those issues are being debated on the campaigns rail. And we'll see how that plays out in terms of the results of the election. I mean one of the things that that I'd just love to add in that regard. I mean, Southern Company has been around for over 100 years, and we've seen a lot of twists and turns politically. But with the experience that we've had and the ability to navigate whichever way the politics go from one side or the other. We, I think, have a tremendous history of being able to work with both parties on whoever is in office. And we feel comfortable and confident that because of the work we do across our communities and our employees living to work there. The commitments we have to the state, we are very confident about our abilities and continue to have a constructive regulatory environment no matter how these elections turn out.

Our next question comes from the line of Steve D’Ambrisi with RBC.

Just had a quick one. There's -- it seems like there's a pretty significant acceleration in like the pace of how you're moving these large loads into late stage and finalizing. And just there's a lot of good numbers of gigawatts that are thrown around. So you added 2 and then you expanded finalizing in late stage to 12. Just how does that interplay with the 2 to 6 gigawatts or like the sizing of the RFP that you're currently working on? And just like to the extent we see -- I just want to make sure I level set to understand like what adding 2 gigawatts to the contract pipeline means or how much of the new RFP that eats up and then what any incremental signings mean for subsequent RFPs or if that makes?

Yes. No, it does. It speaks to kind of updates in the low forecast in terms of a result of the work that we're seeing and the demands that we're seeing from large loans, but also I don't want to take for granted the other large manufacturing opportunities that we see across the state. I mean there is a -- I mean as we talked about, I mean, there's a lot of investment. There are a lot of people. There are a lot of jobs. There's a lot of capital and a lot of interest in our states. And what you see in that RFP is a reflection of that increase in load forecast. And the other thing I'd say to you, and we don't take it for granted and we try to communicate this very carefully, but also just very proud of the fact, as you look at our structure, this vertically integrated structure that we have in terms of the orderly processes and the certainty that we can have with these bilateral negotiations in terms of understanding what these customers need and our ability to respond and to align with their needs is really say, paying off delivering. And that's what you see through this RFP, but that's what you also see in this pipeline in this funnel that we speak to in terms of we highlight the work that we're doing, the activity that we're doing, and we're seeing, I guess, a new phrase we're using call repeat buyers. They find success and say, okay, you can deliver, let's come back and get a little bit more. And so it gives us the reason to be very bullish about the robust activity and demand that we see in our territory.

Okay. That's really helpful. And then just a couple of earlier questions were about accelerating the loads and what it means for affordability. But can you just talk a little bit about the fact that it seems like you guys are pricing these so that minimum bills cover the incremental cost to serve. And so to the extent you have ramp rates exceeding or coming -- exceeding minimum bills and coming close to what is actually projected by the hyperscalers what that means for customer rates and what the time line would be to discuss that with regulators.

Let me start, and then David, I'll kick it to you. I know there's been a language out there about incremental. I mean I think for us, I think more about full in terms of making sure they cover their full share. And as a result of doing that, that provides existing -- provides benefits to existing customers. And that allows us to even have consideration about things like maintaining rate stability and freezes and those kind of things and putting downward pressure on existing customers' rates by having -- by negotiating with these customers to make sure they're covering their full cost, growth provides an opportunity provide benefits to existing customers. I mean, growth is a wonderful value and benefit and contributor to what we've been able to do and what we've been able to deliver to all of our customers and particularly to our existing customers.

Yes. And Steve, you may also want to think about, I think, a differentiating factor in our contracts is the minimum bill that is established within the contract, and it is designed to recover all of the cost introduced into the system, like Chris said. But we're not, if you will, held captive to a variable pricing methodology in order to recover those costs. It's all embedded within the minimum bill. So you could think about it as basically writing a call option to the network, and we recover our costs through that minimum bill not through the variable pricing and making sure that the customer achieves their ramp rates. It's really a very thoughtful design, I think, a differentiating factor around the country, and it's really helping to protect our customers and provide the stability and downward pressure on rates going forward.

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

And yes, perfect timing there. So actually, David, I wanted to kind of hone in on that a little bit. Just the -- I guess, the attractiveness/the ability of you guys who kind of leverage the notion of virtual power plants and just kind of leveraging all of your asset base just being that you guys are fully integrated and the attractiveness of that to kind of just expediting this -- the time to power type of mechanism.

What's your question?

Yes, if you could just kind of comment on that and just kind of frame that. Is that part of the appetite part of the attraction for you guys just to be able to expedite the -- expedite the process to have time to power through that -- those types of mechanisms.

Nick, I mean, great observation, and you use the term vertically integrated. And I think that really does help us greatly in terms of marketing these contracts and having these conversations. The counterparty knows exactly where all of their generation is going to come from, where their transmission infrastructure is going to come from, where the distribution infrastructure is necessary to come from. And so we've been very transparent with our customers through these conversations to make sure that they understand the cost makeup, understand how it's going to happen, when it's going to happen and we've been able to deliver on that. So you kind of answered maybe your own question, and I'd point you back to the vertically integrated model under which we work and the transparent structured regulatory processes in which we go through to establish the approval for the capital that we're able to deploy and the resources that we bring to serve these contracts.

Great. No, that's helpful. And then if we kind of think about just kind of the incremental growth kind of going forward and just the availability of -- within the supply chain and turbine availability. Obviously, you guys had kind of somewhat front run these higher prices. So as we think about it, it seems like you guys are able to ring fence a lot of the costs. But just like contemplating the generation source and generation asset kind of going forward, just how you guys are thinking about cost mitigating the -- just the pricing increases that we've seen on its natural gas or something else, just kind of how we can kind of get that into a rate base and feel comfortable about it.

Let me say -- and we talked earlier about size and scale. And that is one of the benefits that we bring to this period of time in terms of having these relationships, having worked with OEMs, having worked with term suppliers for years. And so we're in line, we have our positions, and we're having ongoing conversations with suppliers to make sure they understand what our needs are, and we understand where they are and making sure that we're that this partnership is being valuable for both parties in terms of not only delivery of units but also in terms of pricing. And so I think in this marketplace, I do think scale matters, relationship matters, having history and experience also brings value. And I think we're bringing all of those characteristics to bear as we operate and function in this incredible transformative period.

Our next question comes from the line of Andrew Weisel with Scotiabank.

My first question is about the Georgia RP. Apologies if I missed it, but what would be the timing of when the process is completed. And relative to that, when you have visibility into the company-owned resources and therefore, when we maintain the CapEx update, I think you said it could be substantial incremental investment. And then related, I think you said the in-service dates would be for 2032, 2033. Could there be appetite for something sooner in the case that demand might materialize earlier? Or is the price specific to that timing?

I hate to disappoint you, but you're going to hold your breath until the end of the year before we get through that process. So it's covered your loan process. And of course, we're not going to get ahead of our regulators and the overall process. So that's the first question. Well, the second question was...

Could there be in service dates sooner than 2032, 2033. Like in other words, I know a lot of -- you're pointing to new gas with those dates, but I know it's all resource.

Not tied to this RFP. Not for this one.

We'll go through the selection process through the rest of this year, and then that will lead to a certification process that will take us pretty much through 2027. And then to the extent that we work through that process and any of our proposals are selected. That would lead toward initiating spend probably in 2028 with those deliveries in '32, '33, and I think we've talked about this in the past, there's probably a decent rule of thumb for maybe a gig of company-owned resources might be 2 plus-ish of incremental CapEx in the latter part of the planning horizon and into the next decade.

Yes. And as you know, we're building some 10 gigawatts now that gets us through the end of this decade and then the RFP that was certified at the end of last year, that kind of gets us into the early parts of the 2030s. So once again, it speaks to kind of the very orderly processes and planning processes that we have across our company.

Very helpful. Okay. Then just to clarify on the equity outlook. First, the $26.5 billion of DOE loan guarantees. Am I right that, that would reduce traditional debt dollar for dollar without impacting the equity. Is that the right way to think about it? Then it looks like an incremental $300 million of equity relates to $700 million from the Southern Power Gas upgrades. What would be the timing of that? I think the upgrades are for '29 to '31 or should I think of the equity being in the later years of the plan. And just to clarify, you do move forward with the additional 300 megawatts. Would that require additional equity? Or was that sort of included? Sorry, I guess that was sort of a 3 for 1.

Yes, that's a multi-parter. So first, yes, the DOE loans, that definitely helps our capital markets needs pretty much takes care of us for at least the foreseeable future. Great pricing helps with liquidity and at Georgia and Alabama, recall, now you talked about Southern Power uprates. And yes, we're continuing along with that sort of 40% equity proportion as we grow those capital opportunities. So that is incremental. That's what we talked about now and keeping us in line with that 17% FFO to debt, as we explore those other opportunities beyond the $700 million we talked about today would likely carry about a 40% ongoing equity proportion. And we'll explore whatever opportunities are available to us at the time and take advantage of market circumstances. But I think it's a good rule of thumb to continue to expect about 40% of incremental capital to be funded through equity.

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

Just one for me. Recognizing the progress on the Southern Power upgrades and the 300 megawatts ago. Just curious about sort of the overall development arch here given that progress on the upgrades is it sort of tracking the expectations you laid out on the 4Q update? And how are you thinking about the timing for more visibility in the, say, brownfield greenfield development there?

Yes. I think it's been tracking as we expected. The interest is very strong on both the recontracting opportunities that we have in negotiation with existing customers. Clearly, from a brownfield standpoint, we're in early-stage considerations of those possibilities. So I think probably later in the year, we'll be in a better position to give you kind of more update on kind of where all that stands. But as we said before earlier, we're executing on what we've highlighted. And so we're moving through the plan, I think, very orderly and delivering as we have outlined. But we'll keep you posted as we see results as projects begin to bear fruition.

Our next question comes from the line of David Arcaro with Morgan Stanley.

Wondering if you could speak to the supply chain and just where you stand currently in terms of access to some of the tight areas like turbines and labor, what you're seeing there?

It's -- in this current market, it's not anything you can take for granted. I would tell you though, once again, I speak to the size and scale of our company and the relationships that we have with these suppliers. The headline would be we're very well positioned, okay? But still, that is not something we can sleep on. We have to continue to work it, whether it's turbines, whether it's transformers, whether it's wire, cable, you name it. That is something our supply chain organization continues to be very aggressive in terms of focused on. We do have -- as we look at RFPs, we do have the turbines identified to support the RFPs. Also, you mentioned labor. We've had a long history of working with labor. We have, I think, an incredible relationship, whether it's building trades, other organizations, labor organizations and we continue to update them in terms of what our needs are, our construction schedules and kind of the skills that will be needed and that relationship -- those relationships I think will bear fruit from us because you've got to expect there's going to be some tightness in the labor market. And so I think those relationships would be very, very important. I mean I go back to on the Vogtle construction at peak periods, we had some 10,000 laborers on the site. And all that we went through through that project I think, further enhance the relationship that we have with labor. We continue to be involved with it. We continue to have conversations about what's coming down the road and what our needs will be. I think those relationships will pay off very well for us in a very constrained environment. So that would be my answer there. So it's about coordination but it's also bought a lot of our experience in terms of what we've done and what the work we've done, things we've built. So I feel good about where we are, but we got to keep getting better there. We got to keep working it.

Got it. Yes. I appreciate that. Very helpful. And then I just wanted to maybe double check. So when would new generation be needed, I guess, as you sign more large load contracts? Like how do we think about the next round of an all-source RFPs, there a certain level of gigawatts that you'd expect to trigger that for another round here or more just a matter of time?

So I think I mentioned earlier on the call, I mean, we're in the midst now of building 10 gigawatts that will support activities and demand through the end of the decade. The RFP that was certified in Georgia end of last year will take us through the early stages of the 2030s. And then this RFP looks more at 2032, 2033 time frame, somewhere between another 2 gigawatts 6 gigawatts. I mean so we're lining up pretty well in terms of matching up with the needs that we're seeing across the economy and across the market. Alabama is also active from an RFP standpoint. So feel pretty good about how we're matching up with the demand and load forecast to meet those deals between now and the mid-30s.

Our next question comes from the line of Paul Fremont with Ladenburg Thalmann.

And a really strong result for the quarter. I just wanted to pursue a little bit Southern Power. Can you give us a sense of how much of that capacity is currently contracted today?

We've set numbers up in the mid-90s in terms of what's contracted, but we know many of those contracts go through in the mid-30s, but we signaled before, but there may be some early review of some of those contracts and our early negotiations in terms of potential recontracting. And then there will be the opportunity to actually have new conversations about some of that capacity being made available. So it puts us in a pretty strong position as we see pricing opportunities. But kind of -- once again, I think we're in a -- Southern Power in a real strong position, recognizing the demand that's currently in the marketplace and what they're seeing around pricing.

And then when I look at the 400 megawatts, should I assume that you've already contracted for that capacity? Or would -- or is it likely that when it's built, you will contract for it?

Now we were in -- you mean the 400 -- the megawatts that we announced, the operating.

Yes, operating, the 400 megawatts of operating.

Yes, those are ongoing conversations, fairly late stage. We'll be wrapping those up in the relatively near future, but those conversations are well in hand.

So likely by the time it's built, it will be contracted?

That is our -- clearly our expectation. I mean...

And then I would assume...

Are you still there? .

Yes. Yes. .

You finish up your question, you would assume what?

I would assume then that part of the decision on the 300 megawatts would basically be assessed based on your ability to potentially contract that additional amount as well?

Yes. And think about it consistent with the way we've run Southern Power over the years, is we're always looking at high credit quality counterparties, typically load-serving, maybe other investor-owned utilities, EMCs, munis. But yes, we definitely do not build it and see who shows up.

And then last question for me. The price per KW seems pretty close to what it would cost to build at least a new CT, if not all that far off from a Newsy CGT. So in terms of your consideration of new build, would that also likely revolve around your ability to contract the plant before it's completed?

Yes, for sure. I mean new build or the upgrades, same operating philosophy, long-term strategy, long-term credit count -- creditworthy counterparties. And it just fits in the business model that we've held to for years and would continue to execute in that same question.

Yes. As we said before, we don't take merchant risk. I mean we're not in the merchant business. So everything is...

And then most likely in your service territory that the part that you're contracting with is probably another utility like a co-op or something like that?

Yes. That's typically the case. That's right.

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

No. Again, let me thank you guys for joining us, and we're excited about the growth we're experiencing and we're excited about the operations of our company. I'll end where I started. We believe we have a bright future ahead. And so thank you for joining us today on this first quarter earnings call. Everybody, stay safe. Have a good day.

Ladies and gentlemen, this concludes the Southern Company First Quarter 2026 Earnings Call. You may now disconnect.