Southern Co. (SO) posted a lower first-quarter profit as warm weather cut power use, but the company said it expects returns on investments later this year, while it awaits a nuclear-power loan guarantee.
Southern, of Atlanta, has started construction on two new nuclear reactors at its existing Plant Vogtle nuclear complex in Georgia after obtaining federal construction permits in February.
The company has been negotiating with the Department of Energy for final approval of $8.33 billion in loan guarantees to finance the project. Obtaining the guarantees is proving more difficult than expected, as the Department of Energy has added new financial conditions following the bankruptcy last year of federal-loan recipient Solyndra LLC, said Chairman and Chief Executive Thomas Fanning.
"We're very hopeful we'll be able to reach a successful conclusion, but rest assured...if they ask us to do something that's not in our customers' interest, we won't go forward," Fanning said during a conference call with analysts. "We'll be successful whether we have them or not."
Southern's chief financial officer, Arthur Beattie, added that if Southern doesn't get the loan guarantee, it will raise the money in the capital markets.
"The markets have been in terrific shape to be able to handle that," Beattie said during the call.
Shares of Southern were recently trading 0.8% lower at about $45.51.
The company, which owns utilities in Georgia, Florida, Alabama and Mississippi, has benefited from stronger industrial demand in recent quarters, although residential and commercial demand has grown more slowly. The company said it expects 2012 sales to improve over the prior year, driven by growing industrial activity and other growth as the U.S. economy improves.
Meanwhile, Southern, which is a major consumer of coal, is increasingly switching to natural gas to generate electricity as prices for the commodity have dropped to historic lows, company executives said.
Southern's 2012 energy mix will be 47% gas, 35% coal and 18% nuclear power, compared to 16% gas and 70% coal in 2007, Fanning said. If gas prices remain low, the mix could be 57% gas and 22% coal by 2020, whereas if gas prices spike, it would be 34% gas and 45% coal by 2020, Fanning said.
The company's utilities will burn less than 45 million tons of coal this year, down from 80 million tons it burned in 2007, Fanning said. As the company consumes less coal, it is working with coal suppliers to defer, buy out or renegotiate existing contracts, while storing coal that it has bought but doesn't need right away.
Also driving Southern's move toward gas are stricter federal limits on coal-plant emissions. Southern still plans to install pollution-control equipment at coal plants to comply with the rules, Fanning said.
The utility giant plans to spend about $6 billion a year over the next three years on capital projects, including the nuclear reactors and new power-plant units. The company's utilities are authorized to earn returns on such investments.
Southern reported a first-quarter profit of $368 million, or 42 cents a share, down from $422 million, or 50 cents a share, a year earlier. In January, the company predicted earnings of about 45 cents a share.
Revenue fell 10% to $3.6 billion. Analysts polled by Thomson Reuters had most recently predicted revenue of $4.05 billion.
Fuel and purchased power costs were down 24%, and non-fuel operations and maintenance expenses rose 2.4%.
Total energy sales, including wholesale sales, fell by 7.3%. Kilowatt-hour sales to retail customers fell 5.1%.
Residential and commercial energy sales, slid 14% and 3.1%, respectively, as warmer-than-normal weather cut energy use. Industrial sales increased 1.9%.
No comments:
Post a Comment
This is an unmoderated blog. Please be professional and respectful as you post.