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Southern Company’s Recent Revenues and Earnings Growth

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Southern Company: Revenue growth

Southern Company’s (SO) top line has been favorably impacted in the last few quarters by contributions from its improved gas operations after the AGL Resources acquisition. US utilities have been facing flattish electricity consumption growth in the last few years. As a result, natural gas was the prevalent domain that was widely explored by these utilities.

Southern Company’s customer base has grown 1% in the last few years, which was in line with the industry average. Customer base expansion became a key factor for US utilities when energy efficiency initiatives lowered the per capita electricity consumption.

SO rev

Despite lower wholesale power prices influenced by weak natural gas prices, Southern Company’s competitive power segment, Southern Power, has managed healthy revenue growth in the last few quarters.

Southern Company’s average revenue growth came in at 8% while its net profit margin averaged around the same levels in the last five years. The spike in Southern Company’s revenue growth after 2Q16 is due to contributions from its gas operations after the AGL Resources purchase.

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Earnings

As we earlier discussed, Southern Company’s (SO) power plant woes have hit its earnings hard recently. In 2Q17, Southern Company reported a $3.0 billion loss on its Kemper County power plant. In 4Q16, the same power plant cost the utility $206 million.

Mississippi regulators ordered the utility to convert the Kemper plant to run only on gas when the economics of the original coal-fired power plant became unprofitable. The original cost estimate of the Kemper plant was $3.0 billion, but after running more than three years behind schedule, the plant’s costs shot past $7.5 billion.

Southern Company’s worries for the under-construction Plant Vogtle amplified after Westinghouse’s bankruptcy. The latest cost estimate for Plant Vogtle has crossed the $25 billion threshold, and the deadline has jumped two more years to 2023.

In the next article, let’s have a look at Southern Company’s debt profile.

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