The Southern Company (SO) Q3 2013 Earnings Report, Transcript and Summary

Southern Company’s Third Quarter Earnings Call will feature slides that will be available at the beginning of the call on our Investors Relations website. You can access the slides at investor.southerncompany.com. Good afternoon. My name is Melody and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company third quarter 2013 earnings call. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, October 30, 2013. I would now like to turn the call over to Mr. Dan Tucker, Vice President of Investor Relations and Financial Planning. Please go ahead, sir.

Thank you, Melody. Welcome to Southern Company’s third quarter 2013 earnings call. Joining me this afternoon are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Art Beattie, 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 and subsequent 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. To follow along during the call, you can access these slides on our Investor Relations website at www.southerncompany.com. I’ll now turn the call over to Tom Fanning.

Good afternoon and thank you for joining us. 2013 has been a very active year for Southern Company with major progress on construction projects, a robust regulatory calendar and unexpected challenges in the form of consistently unseasonable weather. Let’s begin on the regulatory front, where we continue to see constructive processes and outcomes in all four states in which we operate. An extensive review of Alabama Power’s RSE rate mechanism was concluded in August. Following three public hearings, the Commission chose to change the way RSE is measured beginning in 2014 to a weighted cost of equity range that appropriately takes into account Alabama Power’s equity ratio. Georgia Power will file its rebuttal testimony by November 15, with rebuttal hearing scheduled to begin November 25. A final decision on the Georgia rate case is expected on December 17. Recall that Georgia Power has operated under a series of three-year rate plans since 1995. These plans have all been the result of negotiation and compromise between Georgia Power, the Commission staff and other parties, as approved by the Commission and agreed to by the company. The Georgia Commission has a long history of constructive regulation and we fully expect that the outcome of this case will reflect a continuation of that record. In other Georgia regulatory news, the eighth Vogtle Construction Monitoring report was approved by the Georgia PSC by a unanimous five to zero vote. This latest regulatory approval means that a total of $2.2 billion in construction costs has now been verified and approved by the Commission. Meanwhile, testimony continues to be filed as a part of the Georgia – as a part of the Gulf Power rate case. As a reminder, Gulf’s request is for a $74 million base rate increase that would become effective in April of…

Thanks, Tom. For the third quarter of 2013, we earned $0.97 per share, compared to $1.11 per share in the third quarter of 2012, a decrease of $0.14 per share. For the nine months ended September 30, 2013, we earned $1.41 per share, compared to $2.26 per share for the same period in 2012, a decrease of $0.85 per share. Our results for the three and nine months ended September 30, 2013, include after-tax charges of $93 million or $0.11 per share and $704 million or $0.81 per share respectively, related to the increased cost estimates for construction of the Kemper project. As previously communicated, Mississippi Power will not seek recovery of estimated cost to complete the facility above the $2.88 billion cost cap net of DOE grants and exceptions to the cost cap. Year-to-date, 2013 results also include an after-tax charge of $16 million or $0.02 per share for the restructuring of a leveraged lease investment recorded in the first quarter of 2013. Earnings for the nine months ended September 30, 2012 include $21 million or $0.02 per share of insurance recovery related to the March 2009 litigation settlement agreement with MC Asset Recovery, LLC. Excluding these extraordinary items, earnings for the three and nine months ended September 30, 2013 were $1.08 and $2.24 per share respectively, compared with $1.11 and $2.24 per share respectively during 2012. Excluding the effects of Kemper County, the primary driver for our third quarter results was milder than expected weather, resulting in a decrease of $0.07 per share on a quarter-over-quarter basis. Weather was actually $0.10 below normal, compared with $0.035 per share below normal for the same period a year ago. In terms of cooling degree days, the third quarter of 2013 was one of the mildest in the past 20 years.…

Thanks, Art. There has been a lot of interest recently in the emergence of a changing trajectory in long-term earnings per share growth to our industry, we’ve noted that many of you are writing about that now. It has been our practice for the last decade or so, we will provide updated guidance range for 2014 and an updated long-term growth rate during our fourth quarter earnings call in January. It’s been an awfully busy year with a lot of important regulatory outcomes either pending or complete in all of our jurisdictions. For example, we expect the Georgia Power rate case to conclude in December. So there is still a lot of important information to be factored into our long-term EPS growth. That builds an interesting question, what do we think will remain the same and what do we think will change? While we don’t yet have the specifics, we can talk directionally. First, what do we expect to remain the same? Dividend policy, based on what we see today, we believe our dividend growth trajectory will remain consistent with the dividend increases of the past six years. Now dividends are ambiguously the purview of our board what we are confident in our ability to continue deliver those returns to our shareholders. Second, what is likely to change? The shape of our EPS growth, compared to the past 10 years, our EPS growth will likely slow a bit during the middle of the current decade, but will likely increase again, by the end of the decade. Why? Well, as you know, Southern Company has been investing capital at a very healthy rate for many years now, supporting major projects, like our McDonough Gas Units, Plant Vogtle, Kemper County, our environmental spend and growth at Southern Power. In fact, our CapEx as a percentage of our invested capital base has averaged about 8% over this timeframe. As we work through our annual update to the financial plan, this percentage is projected to become smaller through the middle of this decade, associated with this reduced CapEx and growth of invested capital is the fact that our cash flow metrics are expected to improve dramatically. In fact, within the next three-year period, our equity need could be eliminated or go negative in order to preserve our target equity ratio. And by the end of the decade, our growth in CapEx is expected to resume with the advent of more environmental spending and the commitment of our next phase of generating capacity for our traditional operating companies and Southern Power. We are now ready to take your questions. So operator we’ll now take the first question.

Thank you. (Operator Instructions) And our first question comes from the line of Steve Fleishman with Wolfe Research. Please proceed with your question.

Hey, Steve. Steve I. Fleishman – Wolfe Trahan & Co: Hey, Tom and Art. Just first when you do get to kind of more specific guidance next year, this 268 that you’re now guiding to this year, will you like normalize that for the weather as a base or is that kind of assuming you get there that kind of the base we should think about?

Yes. we always give weather normal projection. Steve I. Fleishman – Wolfe Trahan & Co: Okay. Second question is on Vogtle, can you give us an update on the modules this year, Lake Charles et cetera, is that likely to stay on schedule to be resolved by the end of the year?

So the kind of primary focus is on the CA 20 that we’ve referenced. I think the important thing to note is that all of the material associated with CA 20 is currently onsite. Construction is progressing in an acceptable manner and like we said, we’re projecting the assembly of CA 20 would be done by year-end. That’s kind of most important, that actually forms a support mechanism for other modules, for example CaO-1 that will occur later in 2014.

To just clarify that, that didn’t mean that the issue with the modules are essentially resolved in terms of it being kind of, any kind of a critical path issue in terms of current schedule for the project?

So we – listen, I think we said there’s a lot in the past, there are always issues, right. And so what we’re always doing is, working through the issues. So is it resolved? No. Do we have acceptable workaround for every issue that we see right now? Yes. When we talk about critical path, we fight among ourselves here about that, because there maybe – for the remaining integrated schedule, there maybe something like 20 to 30 critical path items. And if you are a week late on one, it doesn’t mean that you are a week late on the end of the schedule. We believe that in our evaluation of our other critical path items, we actually have improvements in the schedule. We believe right now, the sum total of critical path progress keeps us on schedule. Steve I. Fleishman – Wolfe Trahan & Co: Okay. And then, one other question just on Kemper, in the last two updates, I think you’ve given some – you’ve obviously had these write-offs. but I think in some of the higher costs you’ve been able to kind of defer for recovery. Could you kind of highlight what that number is and why is that piece able to be deferred for recovery versus the others have to be kind of countered in the cost cap?

Yes. Steve, if we look at the project cost that we expect recovering on, it would be the basic $2.4 billion plant cost that we initially certified to, the cost of the man, which is about $250 million, the cost of the pipeline, which is roughly $115 million and then there are some other regulatory assets that we’re on Mississippi Power’s books that are scheduled to be recovered as well, that’s about $190 million. And that’s when we look at what would be within Mississippi’s Power earnings rate base, that’s what we look at. The other pieces of it would be AFUDC, which is roughly $425 million and then the difference between 2.4 and the 2.88 cap will also become part of the securitization package, that totals about $480 million. Those are the pieces that make up what we’re looking at, at this point, other than the write-off amounts. Steve I. Fleishman – Wolfe Trahan & Co: Okay, great. Thank you very much.

Thank you.

Our next question comes from the line of Julien Dumoulin-Smith with UBS. Please proceed with you question.

Hey Julien. how are you doing?

Hey good afternoon. Julien Dumoulin-Smith – UBS Securities LLC: Hey, not to bad. Thank you.

Good. Julien Dumoulin-Smith – UBS Securities LLC: Excellent. So just turning to the CBI and I suppose the issue of CBI and litigation and settlement what have you – how do you see that progressing here? I mean it seems like you’ve got some progress, there’s still some other issues out there. ultimately, how do you feel about that getting resolved and what timeline? And then beyond that given I suppose some slippage in settlement, some slippage in schedule and module 20 what have you, is there a potential to go back to CBI for more perspectively?

So let me give you kind of a broad comment. In the middle of negotiations or whatever, you never want to give kind of give specific advice. Let me give you some very clear though, I think general guidance there. As Chicago Bridge & Iron acquired Shaw, we had a change in leadership. Philip Asherman is the CEO of CB&I. We have found a relationship between us and the consortium, particularly with CB&I and Philip Asherman to be excellent. Danny Roderick now leads Westinghouse; likewise the relationship there is excellent. There are issues that are within the purview of the consortium, how cost gets shared among and between Toshiba Westinghouse and CB&I that we’re not party to, that certainly do factor into the resolution of the commercial dispute. So between the company and the consortium, I would argue the tone has turned a lot more positive and certainly I think the progress of the litigation is expectable. So while I can’t offer you very much specific than that, I would say the general tenor should be positive. What else do you want to cover there? Julien Dumoulin-Smith – UBS Securities LLC: We can leave it there if you want.

Okay. That’s fine. Julien Dumoulin-Smith – UBS Securities LLC: Thanks.

Thank you and state your column in. Julien Dumoulin-Smith – UBS Securities LLC: Yes.

Our next question comes from the line of Jonathan Arnold with Deutsche Bank. Please proceed with your question.

Hey, Jonathan. Jonathan P. Arnold – Deutsche Bank Securities, Inc.: Good afternoon. Just to clarify, Tom, on these modules, last – I think the last update was some of them were still in Lake Charles. You are saying today, they are all physically in Georgia at the site.

The A-20 is all there. Jonathan P. Arnold – Deutsche Bank Securities, Inc.: Okay. And but there are still some documentation and other issues you got to tie up?

Yes. They call them remediation, but essentially whenever you find like a small defect or whatever, what you do is fix it on-site and we just felt there was a much more efficient time effective process to get them onsite, fix the documentation, get them ready to go. Jonathan P. Arnold – Deutsche Bank Securities, Inc.: My understanding was the NRC had to sort of sign off from them being moved and that would be a sign that they were resolved that?

That’s right.

Well that they have – yeah, they’ve been moved to site, but they haven’t been accepted by us and from a quality perspective. Those elements that are still being remediated, are still being remediated under CBI’s oversight. Julien Dumoulin-Smith – UBS Securities LLC: So it does have a…

Yes. Julien Dumoulin-Smith – UBS Securities LLC: Aside from this sort of logistical help I guess it will be, there will be that sooner, when you do resolve those issues and issue that needs to be still unresolved?

That’s right. Julien Dumoulin-Smith – UBS Securities LLC: Okay.

We’re actually feeling really bullish about that. Julien Dumoulin-Smith – UBS Securities LLC: Sorry

I think we’re feeling really bullish about… Julien Dumoulin-Smith – UBS Securities LLC: About getting, okay…

CA20 Julien Dumoulin-Smith – UBS Securities LLC: Rather than having resolving it down in the south and then you go to get them off that?

That’s right. Julien Dumoulin-Smith – UBS Securities LLC: Later, okay. and then on the Kemper, can you just what – I think when you originally announced this earlier in the month you said that it was really – this was really weather there will have some other issues. So the way you talked about is in the 8-K last night, it sounded like might be more productivity and then the weather was a sub-factor, is that…

Weather is a factor. Julien Dumoulin-Smith – UBS Securities LLC: Is that…

Yes. Let’s kind of go through that a little bit. early on, when we talked about, we did see weather being kind of the major thing. And I remember right out of the gate, we had some ambitious targets and right out of gate, we hit out targets and that – that’s the tone you were getting from them. As we progress on installing the pipe particularly, it’s almost hard to imagine unless you’ve been there, I know some of you have been to the site and you’ll now what I’m talking about a) there is a lot of pipe, b) there is different kinds of pipe, wide bore pipe, there is small bore pipe, some of the pipe is outside the physical structure of the gasifier island and the gas annealing system. Some of it is in constraint spaces inside the structure. Obviously, what we have found is the production levels that we saw earlier we’re not able to be sustained, because a lot of the work ended up being detailed work inside the structure. we just did maintain the kind of productivity that we wanted to see, further – and we kind of alluded to this, we are now with over two shifts of 2,000 craft people per day working on this issue. And to some extent, there is a saturation at the site, we don’t think it productive to add more people and add more shift and everything else. We’re kind of where we want to be here and part of changing the schedule; I suppose that we could have done more and try to keep May. But we felt that for the overall health of the project, it was important for us to take this new schedule, put people to work in a more efficient manner and get the work done. So it’s kind of all that combination and when we say, weather and rainfall and all that, I remember we were down there one day; we go to visit the site, a good bit as you can imagine. It’s not just rainfall, sometimes, it’s fog. And in fact you can imagine, big cranes working and manipulating some of the material on the site. if you can’t see the top of the crane, you can’t work. Julien Dumoulin-Smith – UBS Securities LLC: Right.

And so fog ended up being an issue. Julien Dumoulin-Smith – UBS Securities LLC: Okay, that’s helpful, Tom. Thank you. And then on – just on the growth topic, you talked about the sort of mid decade slowdown shift of all of a cash generative mode. To the Steve’s question on weather and guidance, we’ll see a weather headwind year-to-date?

Year-to-date, it’s $0.14, against normal. Julien Dumoulin-Smith – UBS Securities LLC: So would you anticipate talking about growth off of $268 number plus that $0.14, wouldn’t it be more explicit?

Yes. The thing you have to normalize, as well as O&M. So it’s not just the one-sided equation.

That’s right, yeah. Julien Dumoulin-Smith – UBS Securities LLC: That’s fine.

So we’ll decide where that ought to be and when we talk to you in January.

Let’s do the dumb math a little bit, real quick. Jonathan, I think it might be helpful. If you add together less than expected sales and lots of sales through the weather, we’re in $418 million range for the year, somewhere around there.

Two years.

For two – for two years.

Yes, yes.

And O&M is down a similar number over something like two to three years. So we have moved O&M and weather in concert to the extent we can. At some point, one of the issues that we face is – and Art loves to keep reminding me of this that something like if the past 25 months, we have had below normal weather or milder weather, 22 of the last 25.

Right.

And therefore, I suppose we could just continue to take O&M out of business and I guess we could do that. However, that doesn’t really serve our responsibility of clean, safe, reliable, affordable energy to our customers. So we have to balance that whole equation. So look, we do to weather normal projections, we will do that. We need to restore some O&M to get back to other normal activities. Let me just – I’m dying to do it; I always love to do this lagniappe in this call. You all on the call are familiar with heating degree days and cooling degree days. You’re not going to believe the profile this year of Southern Company. If you look at the cooling degree days and heating degree days, for the month of January, February, March, June, July, August they were all about the same number. it is astounding the kind of year we’ve had. Julien Dumoulin-Smith – UBS Securities LLC: Well that is – so Tom, thanks for all that color and thus you maybe, it’s pinning you down too far, but on the growth outlook obviously, you have this four to six currently and five is sort of the midpoint. Do you still see five as being part of the range, as you think about it out of the decade?

Yes man, we’ll update everybody. We’ll update everybody in January. What we were able to say here, because I know everybody is going to want another specifics, we’re just not ready to do specifics, we’ll do that January as we have for the past decade. But what we could say, in all the uncertainties, even now in our financial projections, we do have a – what appeared to be a dominant solution. The dominant solution basically says, sort of rate of growth of dividends, we think will be consistent with the past, putting in place all of the caveats about purview of the board and everything else. Julien Dumoulin-Smith – UBS Securities LLC: Okay. That’s good, thank you, Tom.

You bet, thank you.

Our next question comes from the line of Shar Pourreza with Citigroup. Please proceed with your question. Shar Pourreza – Citigroup Global Markets Inc.: Good afternoon.

Hello, Shar. Shar Pourreza – Citigroup Global Markets Inc.: How are you guys.

Good.

Superb. Shar Pourreza – Citigroup Global Markets Inc.: Just a question on your cash flow profile, I think you’ve kind of hinted that you should see a potential improvement in that outlook over the near-term. could that potentially eliminate any equity needs in 2015 at the earliest?

Yes. I think when you look at our equity needs, we’ve outlined the need for equity a little bit more this year, total of about $700 million for the year and $600 million next year. 2015 is still kind of a toss-up, but as to whether or not we’ll need any is a function of obviously tax policy, with bonus depreciation that we qualify for all of that kind of stuff. but we may not need any equity, additional equity in 2015.

In fact, the net of 2015 and 2016 could be zero. If you sell some in 2015, you could have a negative in 2016. Shar Pourreza – Citigroup Global Markets Inc.: Okay, perfect. And then just one real top level question to the extent that you can answer it, I think you mentioned maybe in the prepared remarks that some of the growth that you see could be back-end loaded, and you typically issue your guidance, CAGR; it’s usually more of a long-term picture. Can you at least directionally mention whether the growth in the outer years can offset a potential slowdown in the interim?

Well, the way you should think about that is that – what we try to say is, I’m going back to John Chiles, that old stuff. Those of you that aren’t old enough to know John Chiles, you ought to read his book. He is old guy on Wall Street, but your earnings per share growth rate for net growth and dividends per share at or above the rate of inflation, but we’ve been able to do with this tremendous growth period that we’ve had is increase our dividend. I guess, it’s the past six years in a row at $0.07 a year and what we’re saying here is by almost any measure we’re looking at, we can maintain that kind of trajectory assuming that the Board agrees and everything else, but that’s what we think. So you should think about earnings per share growth and dividend per share growth together and by saying, I think, we can keep that $0.07 trajectory going, I think, let’s say that whatever happens in the near-term is benefited in the longer term. Shar Pourreza – Citigroup Global Markets Inc.: Okay. Thank you so much.

You bet.

(Operator Instructions) Our next question comes from the line of Daniel Eggers with Credit Suisse. Please proceed with your question. Daniel L. Eggers – Credit Suisse Securities LLC: Good afternoon, guys. Hey just industrial kind of showed nice up-tick in the quarter from what we’ve seen of late, can you just may be give a little more color on to much where the breakdown of performance has been, but when you talk to all of your customers, what their expectations are in the year-end and for next year from a planning perspective?

Well, again, it’s going to vary depending on the industry you’re talking about. I’d say auto transportation is going to continue to expand and I believe all of our manufacturers are operating two shifts five days a week, some more. We expect that certainly to continue. Primary metals has been kind of up and down depending on what the metal is being produced for. Obviously, automotive metal has been – demand has been pretty high, but construction materials and other steel related products has been – that might be elated towards the export market has been kind of spotty as well. Our chemical numbers year-over-year looked down and that is because one of our bigger chemical companies closed one of their processes here in Georgia and so yield at the end of this year that will be removed from the process. So you should see a continuation of pretty strong performance in the chemical side. And again, housing-related stuff is really off a pretty low base. So – but we’re pleased to see that they are improving. I think, Dan, it’s probably a mixed bag and it’s a little too soon for me to comment at this point, but we don’t see a wholesale slowdown in the industrials sector.

Well, let me give you just a little more [indiscernible] here. The residential and kind of housing numbers are pretty interesting. We used to get about 70% of sales from single family home and with the economic recoveries and the pullback in the housing level, now with recovery, the number looks like 62% instead of 70%. So we're seeing more people come in. One of the other questions that we've all had as an industry, I know we've had a lot of fun talking about on these calls, has been the whole kind of consumption pattern of residential customers. One of the other issues that we – when you peel the onion on the numbers, we've seen more customers come in, there are houses with meters, but nobody's living there. There are people now trying to sell them again, where they didn't before. So you've got to factor all that stuff into account. So we actually think the trend here is positive. Let me give you just a couple more things to keep your eye on. Domestic energy prices, particularly, good old Southern Company energy prices remain awfully strong relative to averages and I think that gives us the basis to compete well and gives us, I think, some good gunpowder, if you will, for companies to conveniently locate in our area. Another thing, exports, significant part of our industrial production goes to the export market as the worldwide markets continue to improve. We'll do it. One more and then I'll turn it over, but pipeline is interesting. Pipeline shows up as an industrial customer. Most time industrial customers are not sensitive to weather. In this case, pipelines were sensitive to weather. And in fact, I think it was our worst performing segment, but we think it was all weather related. So if you get more normal weather, more normal throughput, better performance. Daniel L. Eggers – Credit Suisse Securities LLC: Got it. That was interesting on the house flipping front. I guess, switching gears on Kemper and kind of these prudence reviews, can you just share where really was going to be a conversation and how that's at play relative to the $2.88 billion cap you guys already agreed on?

Well, I'll give my shot at it. Art, give yours. I mean, who knows, number one, I mean, we've got to have the prudence review and we're giving them all the documentation and everything else. Certainly, we are disappointed with the additional charges that we've recognized and what we believe will be a future loss. It would be amazing to me for somebody to come up with an argument that for at least the first $2.88 billion that we are in prudent, knowing that we are writing off now on a pre-tax basis over $1 billion. I would find that a very tough argument to make.

I think it's also important to note that under Mississippi Law, as I understand it, that an assumption of prudence has to be made and that there has to be proof of imprudence when you go through the whole process. So it's something that's been clarified here as of late.

And I'll just tell you some, I mean, we believe the problem at Kemper was essentially at the time that we made a fixed price commitment with 10% engineering done at 6.7% contingency. In other words, the problem has been more and more a lack of engineering that was completed, rather than construction. By all accounts, the construction of Kemper has gone very well. Daniel L. Eggers – Credit Suisse Securities LLC: Got it. And I guess just last one, Tom. I know you guys can talk to this next quarter, but when we think about the acceleration of growth, just kind of big bucket wise, is that going to be driven by infrastructure replacement, is that going to be driven by reacceleration in power demand or what do you think are the things in the horizon that’s going to facilitate a higher rate of growth?

Sure, it's higher rate of growth compared to kind of the 2016, 2017 timeframe. It's going to be more like this, I think, when you look at the integrated resource plans across the system, kind of the next timeframe of new generation will be in the early 20s. So let's just say 2023. So getting ready for that, starting construction, all that, will be one. That's for our retail operating companies, further. Southern Power, the Southern Power people work really hard to produce results. When I think about Southern Power this year; last year, they made something like, I don't know, $175 million and we've given them a stretch goal to improve that this year. We think they've lost pre-tax something like $40 million on energy margins this year, just because the capacity factors of their equipment is lower, gas prices have gone up something like 80% off their lows, coal prices have come down a bit, especially as we shifted to western coal in the aggregate. So the other thing is we keep pushing Southern Power to go evaluate deals and go buy things that fit our business model. I can tell you, there is a lot out there for sale, but we are very disciplined and we have not pulled the trigger very much absent the solar deals we've announced on striking new deals. So we want to clear that inventory out of the way and accelerate Southern Power's own growth plan. We've also told you in prior calls that we're looking elsewhere, so Texas, MISO, PJM West, a variety of other things, where we might be able to find some more fertile ground. That also is a function of our reserve margins in the Southeast. The other thing I would just mention is environmental spend; particularly ash, water, what else is down the road. The new rules that we're looking at, particularly, for ash and water, are bigger in nominal dollars than our incremental MATS costs. So we think that as we find the firm dates in which we have to comply effluent standard 316(b), CCB, Coal Combustion Byproducts, et cetera, we think those numbers will emerge at the kind of back end of the decade. So we'll be spending money there. Those are kind of the big buckets; new generation, Southern Power, environmental spend. Daniel L. Eggers – Credit Suisse Securities LLC: Great. Thank you for that. I appreciate it.

You bet.

Our next question comes from the line of Greg Gordon with ISI Group. Please proceed with your question.

Hello, Greg. Greg? Don't tell me…

Mr. Gordon, your line is open. Greg Gordon – ISI Group Inc.: Sorry about that. I was on mute. Sorry I'm late. I was – I just hopped off another call.

Yes, sure. Greg Gordon – ISI Group Inc.: Just a follow-up on that line of conversation on the – I take it you said earlier in the call that you would see sort of a dip in growth in sort of the 2016, 2017 timeframe and then accelerate back up in the back half of the decade and I just heard the answer to the last question, which put some more bones around that. If I look at Slide 14 of your slide deck, it gives us 2013, 2014, 2015 CapEx by segment. So is – what you're – is what you're telling us that your new generation and environmental compliance spending will see a dip in 2016, 2017, and then reaccelerate later in the decade, but that T&D, maintenance, [indiscernible] general, the other things are sort of steady as it goes? Is that the right…

Yes. Greg Gordon – ISI Group Inc.: …way to think about it?

That's a good way to think about it. Greg Gordon – ISI Group Inc.: And at Southern Power, you – Southern Power you think will also dip or you think you'll be able to find opportunities to spend there?

We hope we'll find opportunities. By definition, we're a big EVA company and if we can find things that fit our business profile, we're not going to change long-term bilateral contracts, no field risk, creditworthy counterparties; we're going to keep the course there. Greg Gordon – ISI Group Inc.: Right.

If we can find more deals, we'll do them. Gee whiz, we'll do them next year and the year after. The thing is, like I said, there is a lot for sale, it's just kind of junk in my view. And the other thing is we just don't know how much more solar is out there, what our appetite is. We said before, tax-advantaged investing to us requires a risk premium. Greg Gordon – ISI Group Inc.: Right. So – and that $2.4 billion over 2013, 2014, 2015, has always been to some degree, a place holder for opportunities, right?

It’s exactly… Greg Gordon – ISI Group Inc.: Those numbers are even to some degree opportunistic?

They are precisely opportunistic. You're exactly right. Greg Gordon – ISI Group Inc.: Okay, Tom, thanks. That's very clear. Take care.

You bet. Thank you. You too.

Our next question comes from the line of Paul Ridzon with KeyBanc. Please proceed with your question.

Hey, Paul. Paul Ridzon – KeyBanc Capital Markets, Inc.: How are you?

Super. Hope you're well? Paul Ridzon – KeyBanc Capital Markets, Inc.: I am. Thank you. Just the prudence review, is the $2.88 billion, is there any threat of that being disallowed at all or is it anything above that that you're looking at?

Well, there is no – I mean anything above $2.88 billion – wait a minute, let's be clear, there's three big hunks of things, right. There's a mine, there's a pipe and there's a plant. And what I said before was, we're already not charging Mississippi customers above $2.88 billion. That's what gives rise to these expected losses that we've been booking. In terms of inside of $2.88 billion, that's subject to kind of the company and the PSC to decide. My only point was given the cost above $2.88 billion that we've taken for our own account, I would find that to be a tough argument, but let the process go and we'll see. Paul Ridzon – KeyBanc Capital Markets, Inc.: And then with this latest Kemper charge, how is that going to impact your equity needs into 2014 and 2015?

Yes, Paul, we don't expect that they'll change from what we outlined on the last call. $700million this year, $600 million next and then 2015 will be dependent on other Southern Power projects or whatever, but right now, we may not see any need in 2015 or 2016, but we're still maintaining a target 44% equity ratio. Paul Ridzon – KeyBanc Capital Markets, Inc.: Okay. And then it sounds like you – subject to the purview of the board, but you see $0.07 dividend hikes, is that the way to look at it or is it a percentage increase we should think about.

Well, I'm referring to is a $0.07 per share that we've been doing now for six years in a row. And all I am saying with that is you got to put the all right caveats there right. I can't sit here and guarantee everything for you. That is subject and is the purview of the Board, but I can say that based on every projection I've seen, we still need to work through all the he details, we have a lot of regulatory uncertainty still with Georgia and others. It looks like to me a dominant solution. I feel reasonably confident in saying that we can sustain that. Paul Ridzon – KeyBanc Capital Markets, Inc.: But Tom, you sounded pretty optimistic about a Georgia settlement in your commentary. Did I interpret that properly?

We've been treated constructively in this three-year process since 1995. I know there's been lots of questions before by people outside Georgia asking the Commission how will they rule, et cetera, et cetera, and I know that there's been a consistent theme of why should I hurt this company. Georgia continues to provide some of the best customer satisfaction, that's the middle – the center of our business model. We call it circle of life, but it in fact works. If we deliver reliability, low prices and the best customer service that translates into customer value. Our four companies among the national companies we follow are the top four in terms of customer value in the United States. So we see all of the fundamentals in place to continue a constructive relationship with the Commission. Outside of that, I have no color on how that will go. I just think we'll be treated fairly as we have in the past. Paul Ridzon – KeyBanc Capital Markets, Inc.: Are you going to do your triennial Investor Day in 2014?

We are still considering that. As of this point, we haven't made any commitments. Paul Ridzon – KeyBanc Capital Markets, Inc.: Okay. Thank you very much, guys.

Thanks.

Our next question comes from the line of Ali Agha with SunTrust. Please proceed with your question.

Hello, Ali. Ali Agha – SunTrust Robinson Humphrey: Hey, Tom, good afternoon.

Good afternoon. Ali Agha – SunTrust Robinson Humphrey: I just wanted to clarify one or two things. One is to be clear, the fact that you will end at the low end of your guidance range for this year, are you attributing that all to weather or were there some other factors we should be thinking about as well?

Vast majority of it is weather. If it was just economic growth, we could make that up easily. It's mostly weather. This is – we've never had a third quarter in our history we think that mattered $0.10 in weather. Ali Agha – SunTrust Robinson Humphrey: Okay. And then year-to-date weather normalized growth, load growth has been pretty much flat or 0.1% down, can you remind us normalized, what do you see normalized load growth 2014 and beyond, how should we be thinking about that?

Well, and Ali, don't think of it year-to-date flat, all that. Think of it as we suggested. The profile of growth this year has been almost exactly what we thought it would be, except it has been a bit attenuated, right. So the first six months we thought would be flat. Well, in fact, it was flat, maybe slightly negative and you can fool around the edges on that. The last three months has been a little positive, plus 1% weather normal. We hoped it was going to be a little better than that, but that's because GDP is down. It's fascinating. We look at all sorts of things like all the fundamentals that we give you guys every quarter on the bottoms-up evaluations of the economy. The other thing that like the Fed looks at too is this uncertainty index and the absolute level of this uncertainty index that's put out by some people coming out of the University of Chicago, shows that the nominal level of uncertainty is just about double what we've seen in history and importantly, the volatility of uncertainty is enormous compared to prior history. And so what we see now is not only a challenged economy, showing a recovery, although a bit feeble, we now have introduced event risk and when we see fiscal policy fail to resolve the issues of the day, we see all sorts of effects in the economy as a result. People withholding spending and actually saving more money, not all a bad thing. We're seeing companies hold back a bit on capital expansion. We're seeing companies hold back a bit on employment. You know, we've got to get out of this logjam in Washington in order for the full potential of the economy to achieve it numbers. Down the road, we continue to see recovery. We see all the data. I think the only one Art didn’t mention is the commercial recovery. We continue to see good, what you call them, [indiscernible] or whatever there, and typically that’s our lagging indicator. Ali Agha – SunTrust Robinson Humphrey: And just, Tom, to be clear, I mean, as you look forward, remind us, I mean, you see sort of normalized growth what in the 1% to 2% range annually or..?

1.3%. Ali Agha – SunTrust Robinson Humphrey: 1.3%, okay. And then, Art, year-to-date, can you remind us how much equity actually has been issued?

Can you hold on a second? It’s about $500 million year-to-date. We need about $200 million more to get to our target. I think there is an appendix slide on the website, Ali that could give you that number as well. Ali Agha – SunTrust Robinson Humphrey: Got it.

One of things about weather normal, and I know I’ve always said this is that it’s more of an art than a science, but weather this year has been so abnormal that when we do and I know our load forecast folks shoot arrows at me when I say this, but when our models try to normalize it is using modeling from normal weather years. So when you take an abnormal year like this and try to figure out the weather impact, we don’t think we’re getting reliable numbers, but – so we think our growth could actually be a bit better than what we’re reflecting.

Yeah, and let me give you – I couldn’t agree more with, Art, here is one more. Normally, when you think about weather adjustments, you got the temperature. It is clear that the rainfall has had a significant wet blanket on economic activity. People are going out less, spending less. We’ve laughingly used in the past the traffic over the Pensacola Beach Bridge and beer sales out of the Walmart, people just didn’t spend as much money. Shopping is down. So…

That comes from the Fed

Yes. So there is a rainfall effect here, which is interesting, but we don’t capture that. Ali Agha – SunTrust Robinson Humphrey: Understood. Thanks a lot.

You bet.

Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed with your questions.

Hey Michael. Michael Lapides – Goldman Sachs: Hey Tom, hey Art. Just one or two questions on CapEx, I’m just looking at the slide in the appendix from this quarter slide deck and last quarter slide deck. I want to make sure I understand what’s happening here, it looks like you moved CapEx up and into 2013 at Mississippi Power, but then you backed down the back-end numbers there and them at Alabama Power it look like you raised the back-end numbers, but lowered 2013. I just want to make sure I understand the drivers there and then I want to follow-up on Southern Power.

Yes, Michael I’m going to have to get back to you on that, I don’t have that detail, but we will be certainly glad to get you that information. Michael Lapides – Goldman Sachs: Okay. Also Southern Power, you had earmarked about $900 million of CapEx for 2013, we are basically at Halloween I just didn’t know kind of where are you in that run rate and is that a number that’s likely to come down and be a source of cash to the holding company in the next – as you kind of have to fund and burn, fund some of Vogtle.

Yeah, we are about half of that at this point, somewhere around the 450 number is my recollection anyway.

We thought there would be more gas deals around when we looked at another biomass deal we looked at other stuff and we just had them like what we are seeing. Michael Lapides – Goldman Sachs: Tom, you’ve made some comments about Kemper County and kind of that the engineering versus construction processes. Given the fact that its an innovative technology, if you were sitting down a year or two, three years from now with some your peers and had to give them – give like a lessons learned or if I had to do over what would I do differently type. What else, are there other things you would have done significantly different and I’m just really trying to think about this kind of longer term next 5 years, 10 years, 20 years, there is other companies in the industry have to do things that are technologically different than what they have traditionally done.

Yes, let me give you a quick simple and that is, it would be do more front end engineering. Michael Lapides – Goldman Sachs: Okay.

So that would be it, the other thing is we are seeing lots of potentials outside the United States, and here let me give you kind of two factors. We continue to innovate around TRIG that’s the brand name of our technology and in fact there is this other technology we are working on, it’s just a natural evolution at TRIG where we might capture as much as 100% of the CO2. Now we are far from being ready for prime time there, but the linkage of CO2 not as a way for something a value particularly with enhanced oil recovery, they have some potential. And so we are continuing to work on it. So look, we are very proud of TRIG we made a mistake on the engineering. We agreed to price cap without having done fully our homework on the deal and we planned to work. But I think down the road we’ll find ways we think to the capital cost down and make the things economic. The other thing people talk about and what we’ll do is how can you do Vogtle? How you can Kemper with oil and gas prices well we have made probably the biggest shift in the industry from coal to gas. Southern Company is now the third largest consumers of natural gas in United States. Everybody knows I’m bullish on natural gas but we cannot put all our eggs in that basket. We must find innovative solutions to go forward okay. Final point, we are now engaged in some discussion around the world China, Pakistan, Indonesia, Australia, Poland. I’ll be in Washington on November 7 – 6, 7 with Secretary and other energy Secretaries from International companies talking about the applicability of TRIG or any improvements to TRIG that we make down the road. And think about it why it would it might make sense there rather than hear? Well, because they may not have advantages of natural gas industry that’s been created through fracking and so if they don’t places like China, Indonesia, Australia, Poland at all may have near-term uses for this kind of technology. So look, I guess to summarize quickly do more homework upfront understand the risk of a price cap it would be we are going to continue to innovate and we are very proud of this technology we think it’s got great promise in the future we are continuing to work on it. Michael Lapides – Goldman Sachs: Got it. Thank you, Tom. Much appreciated.

You bet.

Our next question comes from the line of Julien Dumoulin Smith with UBS. Please proceed with your question.

Julia?

Julian?

Sir, your line is open.

Operator you can go to the next question.

Our next question comes from the line of Kit Konolige with BGC Partners. Please proceed with your question.

Kit, how are you? Kit Konolige – BGC Partners LP: Tom, how you’re doing? Hi, Art?

Dynamite. Good to hear from you. Kit Konolige – BGC Partners LP: Just a couple of kind of incremental bits of information when to go with that growth rate in sales, what’s your assumption about the kind of longer term five, seven years growth rate in O&M as you go forward.

Well, yeah Kit this is Art. You look at O&M and we have a hard time defining normal in O&M these days. As we look back in time and we just look at our operating company O&M levels over the last four years and if you normalize it for things like the Daniel lease at Mississippi, we’ve been relatively flat a non fuel O&M since 2010. Kit Konolige – BGC Partners LP: And how many assets have you added.

And we have added over the $7 billion of plant and service during that time, including Unit 2 in Georgia around the McDonough, 2500 megawatts of natural gas units, we’ve added scrubbers and SCRs around the system. All of these assets require O&M. So we’ve been able to absorb that around the weather and economic impacts that we have suffered through for the last two years.

So let me just say it differently. So assuming, accounting for increases in assets, increasing the inflation, we’ve actually had declining real O&M level.

That’s correct.

Over four years.

Now you asked a question well what did we plan. How do we plan from there? I would take, this is kind of just a slingshot over the back here, but take a couple of hundred million, maybe $250 and added it to our current, maybe our current 12 months ended numbers and add 3.5% to it a year and that would give you a normal process or expectation around O&M. Kit Konolige – BGC Partners LP: 3%?

Yes.

That's reasonable Yeah. Kit Konolige – BGC Partners LP: And then one other item related to the discussion of the feature and things you don’t want to be pinned down on some, but obviously just doing the arithmetic if your growth rate in EPS is likely to slow some and yet you keep up the rate of growth of the dividend and the payout ratio increases. What level of payout ratio are you comfortable with?

Yes right, so that’s the obvious math right. And remember we said that EPS has a shape now, so we have a trajectory that you are going to be flattened a bit and then revamp. So remember where the payout ratio would rise in the time of flattening, you’re going to be much more cash flow positive. So from a credit metrics, cash flow covers or dividend or however, you want to think about that, we can sustain a higher payout ratio. So we wouldn’t be afraid at all going above 75, I don’t see any scenario right now credibly that would get us north of 80, but I think we could be in the 75 and north range. But I think that would be fine for us to I think longer term we would work it back down. It’s more important for us to have regular predictable sustainable increases in the dividend policy we understand how important that is to investors and I feel confident that we are going to able to sustain that assuming the broad goes along with that.

Right. Kit Konolige – BGC Partners LP: Thank you.

Hey Kit. Kit Konolige – BGC Partners LP: Yes sir.

As our comment, O&M comment. That may not be level across all our operating companies, you may see company increasing if their – for example Georgia Power putting the Vogtle 3 and 4 into service, you are going to see some elevated levels of O&M around the those assets. Kit Konolige – BGC Financial: And McDonough.

Yes. So those numbers may not work by an operating company standard. Kit Konolige – BGC Financial: Right. Fair enough. But if you bring them all up to consolidate them at the Southern level that should be the – sort of rough approximation. Art P. Beattie Yes. Yes. Kit Konolige – BGC Financial: Thank you.

You bet. Thank you.

Our next question comes from the line of Mark Barnett with Morningstar Research. Please proceed with your question.

Hey, Mark. Mark Barnett – Morningstar Research: Hey, good afternoon everyone. It’s been a long call, so I won’t pepper you too much. I just have a quick question on something – the NRC staff release last week. They were talking about greater coordination of safety or severe accident management guidelines, now it might be a very small item given the size of Southern, but I’m just curious if you think that there is something in there that might meaningfully impact cash operating cost for nuclear.

No. We meet all the time on this stuff. You wouldn’t believe – I guess the between me and Mark Crosswhite our COO board members we go to NSRB Nuclear Safety Review Board where we go to each of our plants and evaluate all the details of the operations of the unit. Our OPCo CEO of Macquarie and Paul Bowers of Georgia, Macquarie and Alabama go these meetings. We have board meetings at Southern Nuclear, we meet all of time on these issues, as well at our management council meetings we evaluate kind of budget to actual performance and projections of all our business units including nuclear. While these are important issues that you are kind of highlighting here, we don’t think is a significant budget issue and we’ll be able to work through anything coming our way here. This is not one of the issues that’s going to be a driver to an investor’s decision in a material way. Mark Barnett – Morningstar Research: Okay. I think it’s seems that its still something that’s up in the air and there seems there might even be some internal disagreement, but do you have any feel for what if any – whether it’s a small item or not what if any real changes might be brought about by any such I guess coordination of SAMG.

Hey, Mark you know what I would rather do here, I would rather gets you on a phone with some of our nuclear guys and talk about that, just talking about that in isolation really doesn’t tell the whole story. Remember we had the whole post Fukushima things and we are going to do hydrogen venting and a whole lot of other issues. I can just tell you looking at the budgets of our nuclear business they do grow, but its nothing that’s going to way down our ability to deliver financial results if you want a lot of detail I can put you with the right people. Mark Barnett – Morningstar Research: Thanks and I’ll do that. Thanks.

Superb.

Our next question comes from the line of Mitchell Moss with Lord Abbett & Co. Please proceed with your question.

Hey, Mitchell. Mitchell Moss – Lord Abbett & Co.: Hey, guys. Two quick questions. One, I noticed on the September versus October status reports that you just put out there was a point about the process piping installation and it looks like the number went down by a percent. I wanted to make sure I understand what went on there and how you know I guess is there a problem or on the construction end or what happened?

Okay, yes hi, Mitchell. We are going to probably want to get back to you on that by only sense could be that is kind of production and weather related as I described earlier on the call, but we’ll get you the specifics on that, you’re looking at a specific I think regulatory report, probably what you are looking at. Mitchell Moss – Lord Abbett & Co.: Yes.

We’ll get back to you, call us back later and we’ll figure that out for you. Mitchell Moss – Lord Abbett & Co.: That’s okay and then on the upcoming milestones, there was previously you had said that this steam turbine synchronization was going to be at the end of October, so…

We are synchronized Mitchell Moss – Lord Abbett & Co.: You synchronized.

Yes. Mitchell Moss – Lord Abbett & Co.: Okay so that’s being completed. So it looks like there weren’t any other 90 day milestones coming up or at least listed so are there – what should be paying attention to you know in your significant benchmarks.

Yes, Mitchell I think one thing we’ve mentioned in the past was with first gasifier heat up and that was originally schedule I think December, now it looks like mid to late second quarter. Mitchell Moss – Lord Abbett & Co.: Okay, so that’s a next major milestone that we should be paying attention for?

That’s correct.

Yes, finish the piping [indiscernible] going. So going so far, it’s been going very well we’re 60% through start up something like that 50%.

Right.

And it’s going well.

We’ll have some other milestones beyond that around reliable syngas out of each train, that’s a little bit far off so.

Yeah. Mitchell Moss – Lord Abbett & Co.: Okay, great. I’ll follow-up with you offline on the piping.

Bye, bye.

Our next question comes from the line of Andy Levi with Avon Capital. Please proceed with your question.

Hey, Andy. Andy S. Levi – Avon Capital Advisors LLC: Hi, good afternoon guys. You can hear me I assume right?

Yes.

Oh yes, yes. Andy S. Levi – Avon Capital Advisors LLC: Okay. Just one thing I was confused that they came up earlier in the call, maybe, I just wasn’t aware of it. But just on Mississippi on the $2.88 billion, did you say there is going to be a prudence review around that, I thought that was on the Southern [ph] Stone?

Well, no. there has always been a prudence review associated with the project. I guess as we outlined in our opening remarks, there is going to be one kind of in the spring of 2014 that will cover, I think through 2013. And then we’ll – through the March of 2013 and then expenditures beyond March of 2013 to in-service we’ll have another prudence review on that, that’s always been the case. Andy S. Levi – Avon Capital Advisors LLC: Okay, I apologize.

Yes, no problem. Andy S. Levi – Avon Capital Advisors LLC: I thought the 2.88 is kind of guaranteed and there was no risk to losing that, but I guess that was wrong on that?

I suspect that’s probably isn’t true for anything in the utility industry. Andy S. Levi – Avon Capital Advisors LLC: Fair enough. and then just the last question on Southern Power.

Yes. Andy S. Levi – Avon Capital Advisors LLC: Anything that you end up doing whether it’s down in Texas or outside of your Southern footprint would be contracted right we’re not talking any of merchant type?

Yeah. I said that before, we don’t believe in the merchant model, we think it doesn’t serve customer’s interest in the long run and our business model, remember is long-term bilaterals, creditworthy counterparties, no transmission or fuel risk, things like that. We’re going to stay on that case. that’s why we haven’t done a lot of deal, like I said, there is s lots of stuff for sale and we kick every tire we see, but we are very disciplined in what we’re doing. So the lack of selling and buying projects of Southern Power is not because they aren’t out there, because we don’t like what we see. Andy S. Levi – Avon Capital Advisors LLC: Great, okay. I’ll see you guys in a week. Thank you.

Certainly.

Our next question comes from the line of Ashar Khan with Visium. Please proceed with your question.

Hey, Ashar. Ashar Khan – Visium Asset Management LP: Hi, good afternoon, Tom. I had two questions, one is factual question going to page eight of the earnings package and this shows the financial overview of earnings as reported by each subsidiary for year-to-date as well as quarter-to-date. And I’m focusing on Mississippi Power, just wanted to make sure I’m doing my numbers correctly. Year-to-date, the net income is a $115 million and had back nearly $48 million write off, so it’s a $163 million. I guess, prior to the write off 2012 year-to-date and then if I take the 2013 year-to-date, I’m adding $704 million to the negative $490 million, I get to $214 million. So am I correct Mississippi Power’s earnings are up year-to-date about $50 million versus I guess, everyone else is like flat or down, but am I correct in my interpretation that there’s a $50 million improvement in Mississippi Power earnings year-to-date?

Yeah, I believe you are. It’s mostly AFUDC once you net out all the ex-items that you mentioned. Ashar Khan – Visium Asset Management LP: Okay. Okay. And then, Tom, I just wanted to get, as we – as you have kind of mentioned strategically you are at looking into the next kind of decade in terms of growth and all that, one thing – when you were the CFO in your CFO role in the latter past – in the latter half of the last decade, one thing which was very clear about Southern was and you propagated and you, I guess, you guys still do was risk adjusted returns being very, very superior. What I’m trying to understand is that as you guys were kind of like planning for this decade, where did the miss come that, whey did, I mean, it seems like what’s hurting is that you started two highly risky projects at the same time. So I’m just trying to see what would happen – did the management review that in terms of what you guys were and taking on such two risky projects all at the same time as to why that didn’t come into the mind, because now we are suffering from that risk adjusted – we have become a much more riskier company as the implementation is going through. So I just wanted to understand, did those things come into mind or what drove the decisions to pursue two projects simultaneously at the same time?

There are days I ask myself I suppose, gee whiz, you have to put yourself in the contest of the time in which decisions were made. I think management at that time felt that there was pretty robust growth. A lot of the planning and all that occurred before the downturn in the economy and we were seeing pretty robust growth and so we have always felt about the broad portfolio, we felt that the nuclear program, which is actually going exceedingly well had the right supports in place to make it effective. And so my sense is around Vogtle 3 and 4 it’s a terrific project, its going along terrifically, we’ve had terrific support, support by the Governor, the PSC, the Legislature of the General Assembly in Georgia, the Administration in Washington, Congress, both was going great. The only kind of black cloud here is Kemper and I have said many times that while we are very proud of the technology that we developed along with our partner KBR, remember originally Kemper that technology was going to get built in Orlando, but it was going to get built without CCS, when we moved it to Mississippi we combined CCS with enhanced oil recovery. And we made a strategic mistake back then, we committed to do the deal with a price cap without enough engineering being done, that would be my sense of it. Recall also the state of Mississippi within an interesting position where failing to do Kemper County would have subjected them about, I forgot what the number would be 70% to 90% of gas for their electricity generation and from a public policy standpoint I think the regulator of Mississippi didn’t want to have that much volatility of energy production tied up in that fuel resource. There was a host of issues, but if you think going forward how well Vogtle was going, we definitely would take in our shots on Kemper. I think when you consider all of the efforts in Alabama, all of the other efforts in Georgia outside of Vogtle, all of what is going on at Gulf and really the work in Mississippi outside of Kemper. Southern is and Southern was. We continue to deliver value to customers everyday, products and reliability customer service. And I think if you want that underscore it is a notion that our customer value numbers had been terrific for a long time, we are the top four among the companies we survey. I don’t think Southern – I think Southern is going to be fine in the long run; its just getting through Kemper is the issue. Ashar Khan – Visium Asset Management LP: Okay thank you.

Yep.

Our next question comes from the line of Dan Jenkins with State of Wisconsin Investment Board. Please proceed with your questions. Dan Jenkins – State of Wisconsin Investment Board: Hi good afternoon.

Hey Dan. Dan Jenkins – State of Wisconsin Investment Board: So just a couple here, you mentioned I think on Vogtle how you are in the final phase potentially these DOE loan guarantees.

Yes. Dan Jenkins – State of Wisconsin Investment Board: And I was just curious, you also mentioned in your appendix on financing needs that could be up to $2.5 billion I think. So would that tend to mitigate the needs for Georgia Power to enter the public debt markets?

Absolutely. Dan Jenkins – State of Wisconsin Investment Board: And remember that timeframe.

Yes. Dan Jenkins – State of Wisconsin Investment Board: Okay.

You got it. You got it exactly right. Dan Jenkins – State of Wisconsin Investment Board: And then on – I’m trying to understand on from Mississippi Power given the billion plus of write-offs obviously that would have a big impact I would imagine on the equity and the capital structure. How do you account for that in the right making process given that your shareholders are taking the brunt of those write-offs, would you use like an imputed capital structure, how do – for rate marking purposes how would your capital structure, the equity in your capital structure being?

The equity is – the equity here has already taken place and we will replace the equity as we commence the additional capital that we’re investing in Kemper. So the additional $1.1 billion will be financed with a portion of equity from Southern and it will help restore by the end of 2014, their equity ratio to about a 50% or so level. Dan Jenkins – State of Wisconsin Investment Board: So you won’t try to do on the impeded capital structure, you’ll just use whatever happens to be with that hit that was basically taken by the shareholders for coming up with a cost of capital per rate making you are saying.

That’s correct. Dan Jenkins – State of Wisconsin Investment Board: Okay, that’s all I was wondering. Thanks.

Okay. Thank you.

Our next question comes from the line of Vedula Murti with CDP. Please proceed with your question.

Hey, Vedula.

Hey, good afternoon. Vedula Murti – CDP US, Inc.: How are you?

Good, how are you? Vedula Murti – CDP US, Inc.: I’m okay. You were talking a bit about the back-end of the decade and particularly in terms of place holders and CapEx the churn in cash flow. I’m wondering can you kind of maybe range off maybe over like the five year period 2016 through 2020 or whatever you feel like you can. What type of cash flow flexibility you think you are going to have over and above maintenance CapEx and everything like that and that might be available because it seems like that you have a chance depending that this might be a period of time that would kind of look somewhat similar to periods of mid 90s after you just completed Vogtle.

Yes, hey Vedula I appreciate your interest in that kind of number, we’ll give you more updates in January. We’re just not prepared to go there right now. Vedula Murti – CDP US, Inc.: All right. Thank you very much.

Sure, thank you.

Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your questions.

Hey Paul. Paul Patterson – Glenrock Associates, LLC: Hi, how is it going?

Dynamite. How are you? Paul Patterson – Glenrock Associates, LLC: Well you know managing. Just wanted to sort of follow-up on Kemper, just I know that there is always a disclaimer and everything, but there was this discussion there about some uncertainties associated with what could happen with future expenses costs overruns what have you. Can you give just any sort of flavor as to how you feel about that now with the latest update that you have given us?

Yes, the numbers we’ve given you are based on everything, every piece of information that we know right now. Essentially the information we’ve given you is consistent with the information that we’ve suggested in the past, that any schedule change is worth about $15 million to $25 million, if you just want to do—I always love kind of dumb math, simple math. $15 million to $20 million a month if you go six-month times $25 million to the $150 million and we’ve retained in light of that $100 million of contingencies. That’s how you get to where we are. Of the $150 million there’s still $100 million of contingency in there. Paul Patterson – Glenrock Associates, LLC: Okay, but I mean in terms of just qualitatively speaking, one would think as time goes on and as you guys sort of reach certain milestones of what have you, that’s the uncertainty level would go down.

So I see, I see. Paul Patterson – Glenrock Associates, LLC: Do you see them sort of staying I mean or…

Sure. Paul Patterson – Glenrock Associates, LLC: Sometimes maybe not, maybe like you uncover something there, well actually it’s not that’s what I’m tying to get feel for?

I’m sorry, yes; I see what you are saying. Yes the risk should start converging. So clearly now the risks are moving away from construction, because we’re converging on the completion of construction and the risks are shifting more to start-up risks. And as we have said on the prior calls, I know, several calls the big start-up risk goes to I think the integration of the implementation and control environment at Kemper. Recall, we have an electricity island, we had a gasification, we have a gas handling system. And so that’s kind of what big risk I think and start-up will involve. Now we are doing everything prudent in our power to anticipate that environment, we model; we already have teams in teams in place to assess it. But that’s probably is how the risk moves. So clearly construction risk is converging maybe you got a start-up risk. Paul Patterson – Glenrock Associates, LLC: Okay. And then in terms of sales growth and EPS growth and I know that you are not going to give us really anything until January, if I understand you guys correctly, you’re giving sort of this qualitatively how it may flow through in the next couple of years, just from a very general kind of concept as appose to the specifics. I assume that’s correct, I mean, there’s no way of – I’m not going to be able to get out of your sort of any relative numbers. Is that correct?

That’s correct. Paul Patterson – Glenrock Associates, LLC: Okay I just wanted to check. So your potential that you might actually also reassess the long-term sales growth at that point in time or is that sort of a separate issue? It’s more of a CapEx issue you guys are looking at that or in terms of the O&M. Things other than sales growth that will be making sort of the sort of the determination as to what you guys will be providing us in January?

We do the whole thing Paul, we started with the low forecast and then we put every piece together after that. So that the annual cost as we go through.

But it’s all the package.

Yes.

It’s altogether. Paul Patterson – Glenrock Associates, LLC: So it’s all of that, so is everything is really actually reviewed.

Yes.

Yes, I’m sure, I’m sure. Paul Patterson – Glenrock Associates, LLC: Okay. So we’ll see what happens, okay. Thanks so much, all my other questions have been asked.

Thank you. Paul Patterson – Glenrock Associates, LLC: Take care guys.

At this time, there are no further questions. Sir, are there any closing remarks?

Yes. I just want to say, thank you so much for your attendance on the call. We went over a lot of interesting territory. It’s a little unusual for us to talk about kind of longer term performance. But since it’s been such an interesting topic that many of your are writing about we felt that it was a good things to kind of highlight. We continue to work hard and making Kemper as successfully as it can be. We feel confident in our ability to execute there. Everything else at Southern is going well. When you look at Alabama, Georgia Gulf, the rest of the Mississippi when you look at our fundamentals Southern is performing as well as it ever had. We got to get Kemper build and operational and we’ll be in great shape. We thank you so much for your attendance this afternoon and look forward to talking with you soon in Florida. Take care.

Thank you, sir. Ladies and gentlemen, this does conclude the Southern Company’s third quarter 2012 earnings call. You may now disconnect.