Good afternoon my name is Scott and I will be the conference operator today. At this time, I would like to welcome to everyone to the Southern Company’s Third Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). And also as a reminder, this conference is being recorded Wednesday October 29, 2014. 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.

Thanks Scott. And welcome everyone to Southern Company’s third quarter 2014 earnings call. Joining me this afternoon are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Art Beattiem, 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 of this conference call. To follow along during the call you can access these slides on our Investor Relations website at www.southerncompany.com. At this time, I’ll turn the call over to Tom Fanning.

Good afternoon and thank you for joining us. In a few minutes I will provide an update on our financial results as well as our sales and economic outlook. First I would like to begin with an update on construction activities at Kemper County and Plant Vogtle. First, an update on the Kemper County IGCC project. Last night, we filed our latest 8-K and monthly PSC report for the project, which reflect a quarterly increase in cash comps of $418 million consistent with in-service date in the first half of 2016. As you recall the 8-K, we filed approximately one month ago reflected $88 million in increased non-schedule related cost and indicated that the schedule was likely to be extended into late 2015 pending a review by the project team. Since that time, the project team has worked through their latest comp analysis and identified additional non-schedule related cost of $20 million for a total of $108 million. The remaining cost increases totaling $310 million can all be attributed to the extension of the schedule by 10 months. We currently estimate that each additional month will cost $20 million to $30 million and our increased forecast assumes the high-end of that estimate. As a reminder major construction is essentially complete and the combined cycle portion of the plan has been in service since early August. Is then performing extremely well running at a capacity factor of 80% and has an Equivalent Forced Outage Rate or EFOR of less than 1%. That compared to an industry average for combined cycle of closer to 4%. With the combined cycle producing energy for customers, it’s important to note that the schedule extension we have disclosed before the gasifier and gas cleanup systems of the facility. These two complex systems are key long-term value…

Thanks, Tom. For the third quarter of 2014, we earned $0.80 per share compared to $0.97 per share in the third quarter of 2013, a decrease of $0.17 per share. For the nine months ended September 30, 2014, we earned $1.88 per share compared to $1.41 per share for the same period in 2013, an increase of $0.47 per share. Earnings for the three and nine months ended September 30, 2014 include after tax charges of $258 million or $0.29 per share and $493 million or $0.55 per share respectively related to increased cost estimates for the construction of Mississippi Power’s Kemper County project. Earnings 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 Kemper County project. Earnings for the first nine months of 2013 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. Excluding these items, earnings for the third quarter of 2014 were $1.09 per share compared with $1.08 per share for the third quarter of 2013 an increase of $0.01 per share. Earnings for the nine months ended September 30, 2014 excluding these items were $2.43 per share compared with $2.24 per share for the same period in 2013 and increase of $0.19 per share. A primary driver for our 2014 third quarter results was more normal weather compared to the same period in 2013 resulting in an increase of $0.06 per share on a quarter-over-quarter basis. Third quarter 2014 earnings also benefited from retail revenue effects at our traditional operating companies as well as increased industrial sales and residential customer growth. Revenue increases were…

Thanks, Art. As Art indicated we were having great success at Solar Power, in fact Southern Power’s accomplishments are only one example of our growing reputation as a national leader in the development of solar resources. Notably in Georgia, in addition to the approval of Georgia Power’s advanced solar initiative that Georgia public service commission recently approved 3 rate-based solar project totaling approximately 90 megawatts at Forts Benning, Stewart, and Gordon. These projects are expected to be the largest solar generation facilities operating on any U.S. military base. In addition, the commission recognized a memoranda of understanding between Georgia Power and the U.S. Navy to build a 30 megawatt solar facility at Kings Bay Submarine Base near St. Mary’s, Georgia. Final approval of this project is expected soon. In recognition of these initiatives, which could increase Georgia Power solar resources to nearly 900 megawatt by 2016, Georgia Power was recently named the 2014 Investor Owned utility of the year by the Solar Electric Power Association. Renewable energy is just one component of our commitment to build the nations only truly diversified generation portfolio, one that makes use of new nuclear, 21st century coal, natural gas, renewable and energy efficiency. Our ability to balance field diversity benefits customers directly by helping keep prices well below the national average. Add to that our industry leading reliability as evidence by our 2014 summer peak season E4 of 1.6% compared to the most recent 5 year national average of around 9%. Likewise, our transmission and distribution businesses have performed superbly with our rate of service interruptions and the duration of those interruptions at historically low level. As a result it’s no wonder, our four traditional franchise utilities scored the four highest customer satisfaction ratings among national peer utilities this year as measured by our annual customer value benchmark survey. I’m intensely focused as the entire management team here at Southern on startup activities at Kemper County. Despite those challenges, the Southern company franchise is in a good shape as it has ever been. Our customer focus business model with its emphasis on outstanding reliability exceptional customer service and prices well below the national average remains the cornerstone of our business and a key driver of long-term value to Southern company shareholders. 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 is from the line of Greg Gordon with ISI Group. Please proceed.

So can we talk about the CapEx forecast a bit?

Sure.

So on two fronts, one on Southern Power, you've indicated you're doing really well finding opportunities to put that placeholder capital to work, a lot of it in solar, and that you're going to reassess whether there's an opportunity to spend more basically. Do you see a big enough opportunity to put capital to work at a good enough return that it could move you outside of the 3% to 4% earnings guidance range that you've laid out for people for 2014 to 2016 or is it sort of it pushes you around inside that range?

Hey Greg, let’s carry that conversation next February. I’m a little hesitant to get into kind of revising the forward forecast let’s just say that we’ve had a better than expected rate of success in solar so far using up all of our kind of allocation for CapEx there in solar and I think the presumption is that there is opportunities to do more with respect to the long-term forecast we’ll handle that in February, that’s okay.

Let me ask the question a little differently then. The assumption inside the current guidance was that you'd spend the $1.4 billion?

That’s right.

And earn some sort of reasonable return on that capital; is that fair?

Yes.

Okay. My second question goes to everything you're seeing on the economic development front, seems like things are going really well. The industrial load has been great. At what point do you reassess your 2015, ‘16, ‘17, ‘18 CapEx forecast in light of any sort of upside changes in the economic forecast? Or do you think that sort of sufficient to have the infrastructure you need to keep it with the way the economy is ramping?

I think I got it, Greg. As we look forward I think you are talking about new capacity additions I assume.

Yes, or increased distribution spending because of housing formation? You name it.

There will be some minor affects there but new generation still in the mid 2020s, at least under the current economic forecast that we have. So it would be on the line so more distribution growth to serve some of these customers maybe some transmission but it wouldn’t be a lot at least into the current forecast.

Yeah Greg, the other thing I would just add. There is enormous swing variable and that deals with where EPA is going to come out with this Carbon rule 1-11D find their own calculation this is EPA’s own calculation not ours. They would have projected to build over 5,000 megawatt to combine cycles by 2020. Now I don’t think that a practical assumption not only given the lead times required to build combined cycles plus considering the state of natural gas infrastructure in the Southeast. So my sense is these things are going to have to be bit more fluid than what EPA is assuming. But depending on how that rule turns out you could see a swing in CapEx also.

And our next question is from the line of Dan Eggers with Credit Suisse. Please proceed.

Tom, I just want to make sure I'm not reading too much into your comment on Vogtle, but you made a comment about ongoing pressure on the construction cycle, but you guys thought still manageable. Did I hear that correctly and can you just maybe give a little more color on what's going on that's putting some pressure on timelines?

Yeah I guess it’s out there. SCANA has had some announcements about schedule and cost and all that and we have not I think that’s an obvious kind of conclusion people who make. I would just point to the fact without commenting on SCANA’s situation, that we have a different side and different state of construction and certainly a different contract. Our contract is essentially a fixed price turnkey arrangement. And while there is always a challenge with respect to cost and schedule. I think given the commercial status of our contract with Consortium, we have been assured by Consortium personnel that in fact we can’t meet the schedule. It’s always a challenge it’s subject to change, but we believe as we sit here right now that we can go in service Unit 3 at the end of ’17 and in service unit for at the end of ’18.

Then just kind of against the Kemper rule of thumb, the $20 million to $30 million a month for the delays, would that not apply in the Vogtle situation because of the contract you guys have in place? Or something..

If there were a schedule delay that would be owners cost. Essentially overhead cost with our own over site. But certainly the cost involved with housing workers and whatever other time related cost was really for the account of the Consortium.

Okay, thank you. And then I guess one last question, on the solar development, we've talked to you about the yield co’s before, but can you explain where you guys are taking advantage to win some of these projects rather than relative to the yield co's? You seemingly have reasonably low cost of capital at this point?

Yeah Dan this is Art Beattie. We feel like we have got a lot of the relationships with the developers out there. we have done a lot of projects with the likes of First Solar, the one thing I know is when they do a deal with us that we are going to be able to close, and we are going to be able to in an efficient manner. We have access to low cost capital with decent credit rating. So we still feel like we can be competitive. This recent transaction that we did with First Solar was a little different than some of the others. We basically bought not only 51% of the operating asset but basically the vast majority of the tax benefit. So we are finding different ways to get deals done and this was what we thought was be a win-win for both Southern Power and for First Solar. And we think that both parties are pretty happy with.

The other thing I will just add here too is, you know that we have been very careful about not over expanding on our tax appetite we have found ourselves in a substantial carry forward position that we have always kind of been very careful about tax advantaged investing. I think given that we do have a tax appetite and that we have a strategic kind of reason for being in this space. It gives us a very nice niche in this market that seems to be evolving and I think we tend to be a pretty attractive partner for that reason and all the reasons Art just mentioned. So, my sense is there will be some more opportunities ahead.

The $1.2 billion of CapEx you're able to spend with the tax credits coming back to you, with bonus depreciation, would that affect your ability to monetize some of those benefits, if you think about perpetuating this level of investment or can you manage bonus and these tax credits?

One can only say what’s going to happen with balances and move things slightly through time but even if you get some enormous sense of new tax benefits it won’t move us but a year or so. So, does that shift your IRR curve? Sure but it’s not in a substantial way. Nothing like multiple years of carry forward.

Our next question is from Jim von Riesemann with CRT Capital, please proceed.

A couple questions, the first one is on the fourth quarter earnings estimate. Can you remind us what would drive the $0.11 decline year-over-year?

Well, if you go back and look at our fourth quarter earnings let’s say 2010 forward there is a pretty good variability in our level of earnings in the fourth quarter and it’s subject to where we are at the end of the third and that’s true this year. We plan on making up for what year-to-date been and under spending of our non-fuel O&M and as you know we traditionally do that in the last half of the year and in this case a lot of that will be done in the fourth quarter. So that is the main driver in the reduction and year-over-year earnings from 2013 and the fourth quarter to 2014 and the fourth quarter. I think we did a presentation at one of the investor conferences where we were able to show that over the past 10 years or so we’ve hit our range 100% of the time we can’t ever guarantee that going forward but that is our past history. You know that for a long time we’ve had a practice of being able to structure our O&M spending in such a way that we essentially account for through optionality, variability in weather and through a reasonable variability in economics sales forecast coming to fruition and et cetera. My sense is we’ll continue that practice of matching in the fourth quarter here.

Okay. Second question is on the dividend, a lot of folks are raising their dividend more than historical rates. I just wanted to get a sense as to what you're thinking about the dividend, especially as it relates to a GAAP payout ratio going forward.

So, we’ve been very consistent with this one of the Southern mantras here is regular predictable sustainable increases in earnings per share which provide the regular predictable sustainable increases in dividends per share. For a long time, now we’ve been on a $0.07 per year increase in the dividend per share rate while this ultimately is the decision of the Southern Company Board, management is in a position where we believe very strong we’ll be able to continue that trajectory for years to come.

Okay, just double checking. Thank you.

Thank you.

And our next question is from Jonathan Arnold with Deutsche Bank, please proceed.

Could I just ask you to maybe clarify how the accounting will work on the solar deal in the fourth quarter and perhaps quantify what the impact on the quarter is?

Yes, Jonathan, this is Art. Basically the solar gen 2 project will I believe provide about $30 million of net income on its own. And/or so and then there are some other year-over-year effects that will mitigate that number somewhat for Southern Power along with the other expenses at Southern that I talked about on the earlier call that will get us to our 237 estimate. But we can give you more detail on that if you like offline Jonathan but basically it will be 51% the cash flow will go to us. and we’ll get the vast majority of the investment tax credit.

In terms of timing of how that gets booked, is that all being booked in Q4?

That’s our expectation.

Okay, so the ongoing number will be less, but $30 million is the right number to use in the quarter?

That’s approximately correct.

Okay.

But there are lots of details in there around basis differences and how much -- so we can give you more detail on that.

Okay. Second topic, I was just curious, can you shed a bit more light, Tom, maybe on what you said the project managers have sort of recommended and you have agreed that you should sort of be more methodical about how you work through startup. Is there a practice, this is obviously a significant delay in a large number. Can you give us more color as to what exactly you're going to do differently and how you've arrived at that determination?

Sure and I just want to tell all you investors of Southern that I'll bet you I'm more frustrated than you are and I certainly empathize with any of you that are frustrated. I can tell you that we have had very direct candid tough conversations with the team on executing on this. What the more methodical approach deals with is essentially an extended schedule that relates to training. Recall not only is this an Electric project but it is a chemical and gas process project. There is specialized training and given this is first of a kind technology we are doing kind of a more methodical approach to moving people through all facets of any kind of operational requirements with respect to running this plant. The second we talked about a lot over time and that deals with recall you talk about how complex the integration of this project is and we often use kind of the example of in order to get a combined cycle plant to work you need to integrate three system. This plant has 13 systems. One of the efforts that we are spending a lot of time on in order to do it well is essentially the digital control equipment and the simulator associated with that and so as you would think about the challenges involved in integrating these 13 processes we are following that through on the simulator as well and that also extends to training so that when we get the digital control equipment exactly the way we want it and the simulator the way we want it and the training the way we want it, we will have moved people through again an extended process whereby when we reach the intended in service date, we're ready to go. And I would…

So I am following up one thing you just said. It seems you might be suggesting that you don't really have the training protocols established to your satisfaction yet so you've got to do that and then implement the training or is it just. Am I understanding that right?

No. Here is the deal. In this world it’s called PSM. It’s called Process safety Management and that involves when you basically it’s a regime under which procedures have to be followed. When you turn the plant on an introduce gas live into the turbine. That is the whole new regime. There are no right lifelines about how you must operate. And I think we have brought in a lot external consultants here people that worked at Chevron, people that worked at BP and other places. And I would say here again our approach rather than trying to push something that might qualify we are taking more time to do more in terms of training, so that everybody is essentially up to speed on all facets of the plant. For example, one thing you could do is just train certain people of certain aspects of the plant. We're taking this methodical approach to make sure that we have the best kind of foundation for a safe, reliable operation once we go in service.

And our next question is from Paul Ridzon with KeyBanc, please proceed.

Good afternoon. You indicated that, despite the latest Kemper write-off, you don't think you need to backfill equities, protect the balance sheet. Where are you finding that upside?

Well, we and as I said in the call or in the script we continue to look at it on a consolidated basis. We, as you know we’ve contemplated issuing 600 million of equity this year we’re on very we’re on track to do that we may in fact issue just to hear more than that this year but we’ll see. So at the end of this year we should be in fine shape and as we move forward it’s going to be a function of our need for capital which is also a function of our CapEx is also a function of accelerated depreciation opportunities and those things. So, it’s difficult for me to sit here and be premature to say I’ll need X amount of equity in order to do this. But based on our plans we assumed no new issuances of equity in ’15 and ’16. When we look at the plans that we have in place we already had shall we say placeholder’s room for additional problems elsewhere for example at Kemper or somewhere else. What we’re seeing at Kemper fits within those thresholds and within those thresholds we don’t believe we’ll need to issue new equity and what Art is referring to is one of the big swing that I would see is what if Southern Power has lots more opportunity that could give rise depending on the way tax law changes that could give rise but we already had contemplated we had placeholders, room so that the kind of equity issuances we talked about and really turning off equity was already provided for, we’re well within where we think we need to be from an equity capitalization standpoint. The last thing I’ll just mention here when you look at our profile in terms of reducing CapEx compared to our rather immense invested capital base we started trailing off cash flow and one of the things we suggested in the past still is in front of it as an option and that is reducing our equity capitalization as a percent. So, my sense is we’ve room.

So you're just kind of eating into the head room that you built in conservatively?

That’s the way we plan.

And things continue to evolve, so we’ll evaluate that and will assess it as we move through that.

Kind of going out on a limb here given your conservative DNA, would you guys ever think of an alternative financial structure like a yield co?

Boy, I did in one of the recent conferences I did a presentation on yield co. and I don’t think they make sense for Southern, if you’re interested in the something other than the reader’s digest version I would be glad to give it to you, I don’t think they make sense for us.

And our next question Is from line of Michael Weinstein with UBS, please proceed.

A lot of my questions already answered so I just want to follow up on the throwing off of cash flow, you're saying that might also be Vogtle and Kemper together will eventually be cash flow producers so that you might be able to withstand a little more of a lower equity ratio until they do? Is that basically what you're saying?

That’s correct, it would be after those are operational and that was start depreciating those assets is going to be throwing out a lot of cash.

Also, is there any consideration of other than solar in Southern Power, such as biomass opportunities or any opportunities in other forms of renewable energy?

Yes, sure. One that we looked at in the past it was way back in my time as CFO, those of you who have been around that long may remember we used to have a placeholder in the plan for like $250 million of wind and we used to push around on all the different wind deals. The reason we’ve always been bullish on solar is that it had direct application into our service territory and so therefore we loved especially PV solar we want really bullish on thermal solar. When we thought about wind especially looking at the portfolio and that time frame we were of the opinion that the risk return profile really didn’t fit us given some of the technology challenges and some of the other challenges that industry was facing. What we’re seeing now is a more technology certainly in term of technology it seems like there is two or three kind of really mature ways to harvest wind energy and recall also that wind doesn’t make sense really in the Southeast except for maybe offshore. We don’t the climatology so my comment on wind as a potential would be that I think we’re finding that area to be a bit more suitable and we would most likely do with other than the South East so that’s something we could do. We’re very happy with our biomass deal in Texas. That was the largest bubbling bed technology in North America, I guess it’s a biggest in the world, that was the biggest biomass plant in North America when it was built and unlike Kemper, we built that on time, on schedule and it worked beautifully. To the extent there are other biomass facilities available we will certainly look at that. They come and go on our project development with given all the environmental issues it’s kind of hard to get those done, but we certainly consider that. and let me just lead you with all this discussion about renewals for us gas is still the priority. We think we are preeminent competitive generator in gas and we have just the terrific track record of executing there. So what if EPA comes forward and they start requiring more shutdowns of coal and more gas to be build we are going to be very well positioned to help executing that.

Thanks . Do you have any kind of estimate as to what the timeline of EPA is at this point where they stand on the issue?

You know that, I guess it was yesterday, there was kind of a new alert out they were willing to rethink some of the points of their proposed rule. But what I understand right now, and this is very premature, we're just kind of understanding what's in that latest update is that they are going to try and maintain the same schedule of responses and final rule making. So my sense is you're going to see responses by around December 1 and you're going to see a final rule next summer.

And we have a question from Michael Lapides with Goldman Sachs. Please proceed.

Hey Tom. Two questions for you. One, can you give a little insight, it’s been a couple quarters now in terms of the big spread between what you're seeing in weather normalized industrial demand versus what you're seeing in weather normalized commercial and residential demand. That's one question, second totally unrelated. Can you give an update at all on the litigation between you and the Consortium members regarding some of the I think it was like $900 million or so of potential cost related to Vogel?

Yes you know what I'm going to do? Give you a top answer on the first one and let Art dive into more detail there. The second one on the litigation I think I can hit pretty easily and I don't mean to sound glib here but there's just nothing much to report. We continue to have very productive discussions. We need with Phil Asherman and Danny Roderick and members of Toshiba regularly, there are portal meetings, we get along, we solve problems but you know there's two ways to think about how those discussions occur. One is between us and the Consortium and the other is within the Consortium they have obligations. And so it's not just as simple as us and them, it's them and them. So that's about all I can say on that. There's always been a big difference in weather between industrial and residential and commercial. Industrial sales just aren't very weather sensitive. Certainly, the residential and commercial are. Art do you want to give more color there?

Michael as I said in the script, a lot of its driven by household income and the lack of growth in household income. If you look at the split of residential between growth in customers and growth in usage. Growth in customers was actually positive 0.7% I think on a year-to-date basis and growth in usage has been a negative 0.6 so I mean we're flat. So that's an indication that our people are sitting in their kitchens trying to make decisions on how to make the budgets work and so we're feeling the effects of some of that. I think you're also seeing that true say at Wal-Mart. Wal-Mart lowered their sales forecast growth for the same reason. Another factor to think about on a residential side. When we look at new customer additions about 35% of our new customer additions are in multi-family homes rather than single family homes. Our existing customer base is about 20% multi-family. So, multi-family additions use about 70% of the energy of a single family home so that could be another factor, so because we add a new customer it doesn't mean that they are all the same. These are factors that we have to think about as we move forward and try to predict where sales are going to be.

I gave some comments on this. I did this morning just a bit and that very kind of interesting exchange with Joe Kernan, but I think the Fed and economists all over have over shot where we thought we would be on GDP recovery and I think that it's because you have a bit of a false signal, a false positive on improving unemployment when you consider the jobs that are getting there, they are getting filled, are lower paying service related jobs compared to the past when you consider more part time labor accounted for when you consider disaffected workers. Household incomes are generally flat and you know, that's what we've got to look to. The people that are having flat incomes making tough kitchen table economic decisions as Art said aren't spending money. And I think they have this kind of psychological issue of dealing with the recent recession and something that I don't think is all bad is savings rates are up so people are consuming less. I don't think that's all bad. We don't need an economy and peoples income leading on the edge I actually kind of I’m okay with where we’re on that but that seems to be I think in my opinion a more important statistics than household incomes than say unemployment.

Yes, I was going to comment on the commercial and unless you want to ask a different question.

No, that's exactly where I was going.

Okay, the commercial side it’s still flat slightly negative if you do the splits there customer growth is up but usage is down and so what we see in Georgia particularly around Atlanta was an overbuilt market especially in the retail side and especially in the office side and it’s a little different. The parameter is doing great but the center city, there is a lots of vacancy. So, it’s a different story depending on where you go but the other thing on the retail side is the what I call the amazon.com effect is the fact that more shipments are being made by mail and by the internet I think they doubled since 2009 and so you’re seeing that effect on the vacancy issues around the retail space.

When Art said parameter he is referring to a highway that runs in a ring centrally around Atlanta it’s about 60 mile long highway around Atlanta. So that’s where you’re seeing some commercial growth rather than the internal kind of core part of city.

And our next question is from line of Mark Barnett with Morningstar Financial, please proceed.

Hey, good afternoon guys. Just a couple of follow-up questions, actually, on that last point. I might have missed it, but when you talk about some of these factors that are underpinning the changes in residential and commercial demand, can you talk about what maybe your look forward is for 2015? I know you do a lot of work on your numbers and a final kind of demand not expecting that kind of a number, but what you sort of see in your forecast and in your budgets up to this point and how that's going to impact 2015 versus 2014 so far?

Again it’s going to be a function of the economy as it is always is and we don’t want to get out and find out where we’re going to be February, we’ll talk more robustly in February when we have our revised numbers but if you go back to the 2014 forecast for ’14 to ’16, it was roughly a 1% growth maybe a little stronger than that as you move through the year ’16. But again we redo that every year and we’ll comment more on that in February about our new look.

And without regard to the future, this year our plan was based off 0.7% retail sales and it’s one. So we are reasonably above where we thought we’d be, so the question that we’ll answer in February is what’s our forward guess on that.

Okay, and just a quick one on Southern Power. Obviously solar has been in the headlines and you've had some nice progress there so far this year. I'm just wondering, given where in generation economics have moved for a lot of people this year, have you seen any interesting gas projects that you'd be considering or is that sort of lower priority at this point?

Yes, we actually think there are some on the shelf I want to kind of lay low on that but you want to know a really good kind of target audience with respect to those projects are co-ops and municipal utilities. We have a great track record of serving them here in the South East I would bet you 40 years ago they were kind of the enemy and now they are great partners and they’re wonderful people and we’ve got along great and produced I think really good business results for them and us and I think our reputation is proceeding us and I think we have around the United States more prospects to do more such deals with other co-ops and communities in the United States away from the South East. So I think there will be some opportunity there. And I’ll tell you something now, you know that outside of South East in the United States may presume that we’re in the so called organized market. Our business model will remain the same long-term bilateral contract, credit worthy counter parties, no fuel risk no transmission risk. That’s the way we like to do it.

Our next question is from the line of Stephen Byrd with Morgan Stanley, please proceed.

Hey gentlemen. Most of my questions have been covered, I just wondered if we could discuss the Sanmen nuclear project in China and just generally interested in your thoughts on progress there, lessons learned for the US, or sort of as you look at execution risk in China, how's that project been going?

Well, we’ve had people that live in China that kind of work around that site and we have teams of people that regularly visit sandman to bring back those learning. I would bet you I don’t know I would love to see what buzz’s opinion is here something like up that you 60% of what they do is applicable to what we do where we’re different than them is in the degree of automation particularly in welding practices, they tend to use a lot more manpower, we tend to use a lot more automation. And it worked pretty well. We kind of believe that they are going to be in service sometime later 2015 and as they commissioned that plan that will be very helpful. The other thing that has been helpful to us is they are dealing with some issues with the vendor for example the design of reactor cooling pumps. And I think as they resolved those problems that will out benefit.

And our next question is from Ali Agha with SunTrust. Please proceed.

Just a couple questions, Art, can you remind us, through the nine months, how much equity you've issued so far this year?

We're right at $500 million through September 30.

And if I heard right you may cross the $600 million by the time the year is over?

Yeah, but it’s not completely significant.

Then, can you also remind us, on a normalized basis, what's the O&M base we should be thinking about for you guys and the growth rate of that going forward?

Yeah, Ali, I think what we outlined for this year is that we would be in the if you look at total Southern, we would be just over 4 billion and I think we're going to be very close to that number if we spend what we're going to spend. And as we move forward I'd say a 3% growth rate, maybe 3% to 3.5%. Two of that would be just 2% and 2.5% just core and the other 1% would be related to environmental, environmental O&M. As we start up all these environmental projects that adds a different layer of O&M to the core amount.

Okay. My third question, can you remind us why was Southern Power down so significantly quarter-over-quarter in the third quarter? Related to that then, the Solar Gen 2 project in the past, Tom, you've talked about the run rate of net income for Southern Power around the $170 million a year level. How should we now think of that with the portfolio changes going forward?

Yeah, Ali I think what I said and we actually checked this in preparation of this call. I think I gave a range to about 145 to 175 somewhere around there. and I think we are going to end year at the upper end of that range.

Okay, and why was it down?

It was benefited from solar revenues this year, additional plants and things versus last. But there was some particularly high depreciation expense related to new plant and service. There was a slight change in the methodology went to a units of production method of depreciation that also caused the delta. And then we did some major outage work at one of our units where we had to really catch up on some accelerated retirements just due to the accounting issues related to that one particular plant and that really drove a lot of expense into Q3 of this year versus last. That's why it's down quarter-to-quarter.

Tom, to be clear are you suggesting that, call it, $170 million to $175 million run rate, is that a good run rate going forward as well or does that change with the Solar Gen 2 and other activity that you've done there?

So if I recall kind of the forward curve, Southern Power in the near term had a decent run rate kind of $160 to $170 something like that. It certainly picks up what you have is kind of a filler. We have contracted capacity that picks up again at a certain timeframe. So at the end of the decade it goes up into the 200. But for now I think it’s a decent assumption and certainly we will update you in February on that.

And we have a question from the line of Steven Fleishman with Wolfe Research. Please proceed.

Okay, this is David Paz for Fleishman. Just a quick question, Tom. Going back to Vogtle, do you expect a -- is there a timeline for when you get a new schedule for post-2015?

It's under consideration right now. They are rebaselining and what they're working hard on is see what you always kind of work on here is you have heard that they have had some challenges out of their Lake Charles facility and so the Consortium is working hard on mitigating whatever challenges that they see, certainly with respect to the schedule, and they're obligated to meet that schedule to us via the contract. So one of the things that we meet with them on when I say that Asherman and Roderick and the pertinent members of Toshiba get together. It is to give us the new schedule, right now they know that they have a commercial responsibility to fulfill and so we look forward to seeing how they’re going to do that. So that’s kind of it I don’t have a time frame in which we will see a new schedule but I can tell you that as a topic of current conversation.

Our next question is from the line of Vedula Murti with CDP Capital, please proceed.

Good afternoon, Tom. Earlier during the call, you referenced your tax appetite. I'm wondering if you can both kind of, in a cumulative sense, give a sense of what your cumulative tax appetite is and kind of like the options in which you are looking at in order to optimize that and whether the optimization of that balance has been considered as part of your forward views that you have provided us in the past?

Yes, when you say tax appetite a lot of it varies on bonus depreciation or not so that the numbers going to swing around the good bit absent kind of an extension of bonus depreciation our number would imply and investment appetite of over $2.5 billion. So to the extent you get bonus depreciation path it could subtract, it is current form, we got current bonus depreciation extended again. It would probably take away about 1 billion of that over 2.5 billion number and I’m being very general here because there is a lot of uncertainty with respect to how these things manifest themselves but that would be a decent working number for you to think about.

In terms of the way to utilize a lot of these tax deferrals and everything like that, usually, I think, you were implying earlier about taxable income creation or acquisition in order to optimize utilization of various renewable credits and those types of things. Can you expand a little bit on that if I understood you properly or how we should think about that?

I’m not sure Vedu I mean what that basically says is in normal circumstances Southern Company is a tax payer and our kind of cash tax rate on our booked taxes there are cash tax rate is reasonably high. To the extent, we get bonus depreciation or something else that serves to reduce our effective cash tax rate I think right now this year I’m going to say our effective cash tax rate is around 7% or 8%. So there is still a little bit of headroom. It’s those kinds of factors so my sense is when you look at our normal business we don’t have significant tax deferral items in play. So letting the system run on its own, we become a full tax payer. That gives rise to the $2.5 million, $2.6 billion investment opportunity given the extension of investment tax credit or solar and wind and everything else to the extent that moves from a 30% number to a 10% ITC number than your investment opportunity your appetite actually goes up. So there is a lot of swing here, what I try to do is outlined what I like is caveman math. Under current circumstances without an extension, you’re somewhere in the $2.5 billion to $2.6 billion investment opportunity range. Obviously that can swing.

And these are all cash items? This doesn't affect what we end up seeing on the GAAP financials? This is all cash flow items in terms of how these things swing, correct?

Well in term of calculating tax appetite that’s right ultimately there is a book income impact such as Art described on solar gen 2.

Okay. If next week or whatever, with the elections, if the republicans get the Senate, you're particularly talking about bonus depreciation extension or whatever. If, like I said, if that comes to pass, given the folks you've talked to, what do you think is reasonable or feasible that could occur that's relevant to your business that you'd like?

That’s just pure speculation, my sense is you’re going to see some sort of extender bill whether the democrats hold the Senate or whether the republicans get it. Whether it’s a permanent, whether it’s a two year, whether you’ll extend that kind of the provisions related to wind and solar, my sense is whichever party get the Senate, you’re going to see something that would be my guess. It may also depend on how comprehensive they want to go and therefore what the timing will be of the implementation of that.

Our next question is from the line of Anthony Crowdell with Jefferies. Please proceed.

Good afternoon, guys. I just wanted to hit on Kemper, two questions. One is, you gave a risk of a schedule each month, the cost that shareholders could bear. I just want to know, is there any regulatory risk associated with that seven-year settlement that the gasifier's not in service. Was that part of the settlement that had to be in service by a certain date? The second question is, when do we get through the forest here? Is there a point in the schedule where the gasifier goes online and that's when we could exhale or another point in time where we know the write-offs are behind us?

It does not include anything for the settlement the grand proposal we are working. And certainly there is risk in that, I can’t say that there is not. What I can say about the settlement is we continue to have productive discussion but I can’t predict the outcome of those discussions. What was the other thing you wanted?

I really wanted to know .

Yes. When are we going to get first gas through the gasifier? When is that?

That’s scheduled till July of ’15.

Summer of ’15. That will be a big deal. What we will provide you in EEI is essentially a chart that will layout kind of three club, segments of risk. One is all the milestones that we need to accomplish before we get gas to the turbines and then kind of once we get gas to the turbines we are the milestones following that. And like again I think we are looking at summer of ’15 for that event to occur. That’s kind of what I would say in a broad sense we will have more detail for you actually we will hand out that thing in Dallas.

Just lastly I guess with the gasifier. Anything about seven-year global settlement. How much of that I guess what’s in rate base or what is been recovering rates it’s related to the gasifier.

Well we have rates in place an 18% increase associated with 2.4 total capital investment that we earned on. There are securitization bonds that take us to $2.88 billion. Those are all represented by rates. It’s hard to say if you wanted the segment out what is currently part of the combined cycle, I would say something like $900 million to a 1 billion somewhere around there of the $2.88 billion. Round numbers again.

Our next question is from the line of Kit Connelly with BCG. Please proceed.

Lot of my questions have been answered. I thought I'd inquire about your interest in the pipeline business. As you say, you burned a lot of gas in your power plants, utility in Southern Power and a couple of the big companies around you next year into Florida and Duke and Dominion have talked about the Atlantic coast pipeline. How do you look at the pipeline business as far as your forward book of business goes?

So it’s interesting. We actually go through a process of pretty disciplined pretty rigorous here whenever we think about different companies or different lines of business. And frankly we just covered this with our Board a week ago and our offset kind of strategy Board meeting. And the way I tend to think about it is kind of the red, yellow green chart. So green for us would be an integrated regulated electric utility with make move and sell elements within that. Yellow, to me, would be things like a gas pipeline. It has kind of a similar risk return characteristic, it is not necessarily something we know in depth and that we decades of experience with like we do with others. But it is certainly something we would consider. You are right when people think about Southern Company we will run into it from time to time. People think we are big coal company. We are still big but rest assured that Southern Company I think is the third largest consumer of natural gas in the United States. Gas is a part of our future and that will become increasingly important. And so therefore it make sense for us to consider gas oriented investments along the way. So Kit it’s something we absolutely would consider.

And we have follow-up question from Greg Gordon with ISI Group. Please proceed.

Thanks, Tom. Quick question for you, on page 12 of your handout, you show your Q3 gas combined cycle capacity factors up to 76% versus 68%. Non-PRB is up 44% versus 40%. Where do you see your capacity factor for gas going into the fourth quarter? Where do you think you'll end up for the year? Because it's been quite a turnaround as natural gas prices have come down, right?

Yes, I mean Greg you’re all over it. I think just depends on kind of what the weather hold and everything else but we’re seeing sub $4 gas right now you’re going to see pretty strong performance by our combined cycle fleet over time. At some time -- .

Do you think you'll be at or above the 66% capacity factor you ended the year at last year at the rate you're currently running?

Pure gas.

Thank you.

Depends on a host of factors but yes if you asked me to bet, I would bet.

And our next question is from the line of Andy Levi with Avon Capital, please proceed.

Just to make sure, because I think when you said this, I didn't hear it correctly. I meant that stuff came out right when it was being discussed, but what did you say about rebaselining in the consortium? Did you say you were expecting them to come back with rebaselining?

Sure, the question I think I forget to even ask if somebody asked the right question and that is in fact the consortium SCANA talks about and they are coming back to us with schedule that will meet our in service date. And in talking with senior management we believe that can be done. Now in order for that to be done they’ve had a lack of performance particularly in Lake Charles facility. And so you’re always in this position of mitigation. So to the extent Lake Charles doesn’t perform the way you wanted it to what they’ll do is essentially farm business out as they have to Newport News to make sure that we get the material and the documentation I think was pointed out appropriately in a suitable manner. So, the consortium is working hard to mitigate whatever operational challenges they have, that is always been the case, we believe they can mitigate to the extent they preserve in service date. That’s all that is, that’s an ongoing process.

Again, from what I think you're saying is, either you stay on schedule and costs to stay on schedule could potentially go higher to stay on schedule or costs could kind of not go up as much and the timeline would slip. Is that kind of the way to think about it?

Well here is the way I’d think about it. You get into, they’re going to provide at the schedule that mitigate any problem they have so that they can abide by the contract we have which is essentially a fixed price turnkey contract. I wouldn’t be surprised that they try to issue change orders to that effect but whether or not we accept the change orders depends on what cause the delay or whatever. If it is their own performance it’s for their account, if it is because the NRC did something which may then do something different then that would be a changed order that we would likely accept. Right now, we believe that they are down to deliver a plan in service and we believe they can deliver it and we look forward to they’re meeting their obligations under contract. And I guess we have good constructive conversations with these folks.

When do you think you should hear from them and then us hear from you? Would that be in the fourth quarter or would that be some time in 2015?

We’re having conversations with them right now and I think the other thing I’d try to suggest I hope I wasn’t too obscure when I did it. I was talking about the consortium in respect of the commercial dispute and I said it isn’t just between us and the consortium, is there an effect is a my words but there is a relationship an accreditor agreement, whatever, there was a sharing agreement within the consortium among them between Westinghouse and CVI overwritten by Toshiba. So, to the extent there are commercial obligations that the consortium have to fulfill they have to decide at partners, how they’re going to fulfill that. That really doesn’t have anything to do with us. It’s those issues which have to be worked, which complicates the delivery to us of our fully mitigated schedule. We continue to work constructively on it and we look forward to that happening in the next few months or so. I can’t guarantee what date in which we will get a fully mitigated schedule but we’re working on it.

Got it. Then just back on earlier question as well, same subject mat, going back in time, so on the original dispute between Westinghouse, CVI, and your group, what exactly is going on there? Were there actually talks going on or is there an arbitrator or are we kind of just in the court stage that's going to take a while? Can you give us any update on that? Because I guess CVI seems to suggest on their call, again, it was just kind of a one liner, that things hadn't moved along anywhere on that or were not going.

Well look what I can say is this. We are in litigation mode, so in other words we are going through periods of discovery. We are taking depositions. I can get you detail on when we think hearings will begin and all that of course that’s all subject to what judge ruling on certain matter whereas the venue is Augusta Georgia. That’s kind of where we are. At the same time parallel activity we are having settlement discussions with the consortium and they are very cordial. So this is not bomb throwing and missile launching, this is good constructive talk. And I am trying to convey that it’s not just us and them it’s them and them with us.

I understand. So basically, there are talks going on, but at the same time, parallel the court process continues. It could take quite some time to play out. Is that fair?

That’s right sure. And we would love to settle but we are also prepared to go to litigation as we get a settlement that is desirable for the benefit of our customers.

Just as far as the costs for that or any rebaseline, just to understand, that's something that would be negotiated, it sounds like, based on your contract between CVI and Westinghouse? And your position right now, at this stage, is that you're not willing -- well I don't want to negotiate on the telephone. But basically we should expect those two to be paying that difference, at least it's your position at this point, is that kind of fair? There's some big dollars involved.

My only point is, it’s pretty clear then public knowledge there been some challenges with material coming out of Lake Charles. As a way to help mitigate their challenges and fulfilling their obligations under the contract, they've enlisted some subcontractors, for example, Newport News. To the extent they are able to perform my sense is they are going to be able to hit our in service states and everybody is going to be happy with the ultimate outcome that’s where we believe we are right now.

Just kind of the dollars involved and whose going to eat those dollars and CVI doesn't have as much flexibility, obviously, as Westinghouse or Southern Company or people within your group.

Andy I think we need to. You know I am not going to go there.

No, I understand. It’s interesting to see how it ultimately goes out. Okay thank you very much. I will see you soon.

And our last registered question at this time with Dan Jenkins with State of Wisconsin Investment Board. Please proceed.

First, I just have a clarification on what you said a little bit ago about Kemper. I think you mentioned July 2015 is when you're looking for syngas to go to the gasifiers, is that what I heard?

That’s the good general date I would get that precise but yeah.

So is that the same as first syngas production that you were talking about on your slide from last quarters?

Yes.

Okay, then I also had a couple clarification questions on your Vogtle construction update on page 5 of the presentation. I'm just trying to get a sense of timing of when you know, for the near-term items and those you expect to occur in 4Q? What's the timing kind of related to the cooling tower? Then for Unit 4 for the MCD65 is that before year-end or how should we think about that?

Dan I think the CA1 module is first quarter next year. We should complete the cooling tower in the fourth quarter of this year. And then as far as Unit 4 we certainly should do in the fourth quarter offsetting CA04 and CD65. I think that’s where we are.

Yeah the way I would read that is near-term is kind of year-end.

Okay. And then on the horizon is early next year?

Yes.

Operator anymore questions?

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

Yes sir. Thank you all for being on the call. Thank you for being loyal shareholders. I am disappointed with our schedule and cost performance. We are just rigorously directed and improved our performance there I think we put a methodical schedule that we can hit. I’m going to put intense focus and make sure that we do adjust as well as we can. The project team there understands the intensity of my focus. Other than Kemper, I would say that the franchise is operating just as well as it ever has when you look at customer service, you look at reliability, you look at safety, you look at just kind of how we’re delivering value to the communities we’re privileged to serve this company has never been better. Thank you for being with us and we look forward to chatting with you in Dallas in the weeks ahead.

Thank you, sir. Ladies and gentlemen this does conclude the Southern Company third quarter 2014 earnings call. You may now disconnect.