Report
Charles Fishman
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Morningstar | Southern Says Vogtle on Schedule

We are reaffirming our $52 per share fair value estimate after Southern Co. reported weak 2019 first-quarter earnings, but reported that the new nuclear units at Vogtle should achieve the revised schedule and budget following an exhaustive rebaseline analysis of the project. The project is five years behind the original schedule and double the cost.

On April 30, wholly owned Georgia Power filed the rebaseline report with the Georgia Public Service Commission confirming the regulatory approved in-service dates of November 2021 and November 2022 for Unit 3 and Unit 4, respectively. The current workplan for Unit 3 includes a six-month margin to the regulatory approved date, or a May 2021 in-service date.

Initial energization of Unit 3 is expected to be completed in the next few weeks with hot functional testing in the second half of 2020. Hot testing marks substantial completion although fuel load and final testing could take another six months.

In addition to the upbeat report on the schedule, there was no change to the $8.4 billion latest cost estimate for Georgia Power’s share of Vogtle. The project is now 77% complete, and we think it will be difficult for the PSC staff to be skeptical, as they sometimes have in the past, of this update.

Adjusted earnings for the recently ended quarter were $0.70 per share versus $0.88 per share in the same period last year. Mild weather was a $0.07 drag on EPS and divested earnings were another $0.11 negative variance.

The negative variance from divested earnings, the sale of Gulf Power, and other assets, was expected and Southern reaffirmed its full-year adjusted EPS guidance of $2.98-$3.10. Our EPS estimate of $3.04 is unchanged. We also agree with management that the divestitures were accretive relative to issuing more equity, due in large part to the excellent earnings multiples it received for these businesses.
Underlying
Southern Company

Southern is a holding company. Through its subsidiaries, Alabama Power Company, Georgia Power Company, and Mississippi Power Company, the company is engaged in the generation, transmission, distribution, and purchase of electricity and the sale of electric service in Alabama, Georgia, and Mississippi. The company's Southern Power Company subsidiary develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity at market-based rates in the wholesale market. The company's Southern Company Gas subsidiary is an energy services holding company whose primary business is the distribution of natural gas in Illinois, Georgia, Virginia, and Tennessee.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Charles Fishman

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