Aaron Abramovitz - The Southern Co. Thomas A. Fanning - The Southern Co. Arthur P. Beattie - The Southern Co..

Jonathan Philip Arnold - Deutsche Bank Securities, Inc. Julien Dumoulin-Smith - UBS Securities LLC Michael Weinstein - Credit Suisse Securities (USA) LLC Anthony C. Crowdell - Jefferies LLC Michael Lapides - Goldman Sachs & Co. Ali Agha - SunTrust Robinson Humphrey, Inc.

Paul Patterson - Glenrock Associates LLC Praful Mehta - Citigroup Global Markets, Inc. Andrew Stuart Levi - Avon Capital/Millennium Partners Paul T. Ridzon - KeyBanc Capital Markets, Inc. Daniel F. Jenkins - State of Wisconsin Investment Board Ashar Hasan Khan - Visium Asset Management LP.

Good afternoon. My name is Suzy and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company Fourth Quarter 2016 Earnings. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session.

As a reminder, this conference is being recorded Wednesday, February 22, 2017. I would now like to turn the call over to Mr. Aaron Abramovitz, Director of Investor Relations. Please go ahead, sir..

Thank you, Suzy. Welcome to Southern Company's Fourth Quarter 2016 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 measures are included in the financial information and slides we released this morning and are available at investor.southerncompany.com. At this time, I'll turn the call over to Tom Fanning..

Good afternoon and thank you for joining us. As always, we appreciate your interest in Southern Company. We have a long list of outstanding accomplishments for 2016 and we are well positioned for continued success in 2017 and beyond. We shared many of our 2016 successes at our Analyst Day, but I'd like to recap just a few.

Our longest standing strength is the operation of premier state-regulated utilities.

The addition of Southern Company Gas broadens our opportunity to leverage our customer-focused business model, which has long supported constructive regulatory relationships, world-class customer satisfaction and regular predictable and sustainable returns on investment.

As evidenced by the efficient merger approval processes that were completed in the first half of 2016, all of these newly added LDCs have constructive regulatory framework and well-established regulatory relationships.

Recall that one of the key rationales for our acquisition of Southern Company Gas was to create a platform for future growth in gas infrastructure.

On the heels of completing the AGL Resources merger, we acquired 50% of Southern Natural Gas which serves the vast majority of our state regulated utilities in the Southeast and is arguably the crown jewel of the interstate natural gas pipelines in the southeastern United States.

Not only does our ownership provide for stable long-term earnings and cash flows, it is also expected to provide growth opportunities in the future. At Southern Power, we invested nearly $5 billion in 2016 and began a shift towards wind.

At the very end of the year, Southern Power signed an agreement with RES to jointly develop 3,000 megawatts of wind projects with an in-service date of 2018 through 2020. Southern Power will co-originate the PPA's for this pipeline of projects and will procure turbines through two supply agreements with Vestas and Siemens.

Our initial turbine purchases in 2016 provide a safe harbor for 100% of the 2016 production tax credit value for the full development pipeline.

We plan to invest approximately $1.5 billion per year to grow Southern Power over the next five years and the pipeline of projects under our joint development agreement accounts for most of the expected investments in 2018 through 2020 timeframe.

The addition of PowerSecure early last year provides Southern Company with another important option for the future. PowerSecure is well aligned with our customer-focused business model, providing customers with the energy infrastructure solutions they increasingly demand.

With the slowing of electricity usage, we've positioned Southern Company to serve a nationwide base of customers on both sides of the meter. This strategy includes opportunities under the alliance we announced with Bloom in late 2016.

Much like Southern Power and our interstate natural gas pipeline investments, PowerSecure is positioned to build and own distributed energy infrastructure under long-term contracts in a manner that should provide for regular, predictable and sustainable results. At Vogtle 3 and 4, we continue to make progress on construction.

In addition, in December, as another example of constructive regulatory environments that are key to our overall success, the Georgia PSC approved the prudence agreement we announced in October. As a reminder, the Georgia PSC approved our 2015 litigation settlement with Westinghouse.

In addition, the PSC either deemed or presumed prudent costs aggregating $5.68 billion while providing contingencies for both cost and schedule. The schedule contingencies provided in the prudence agreement consolidate the project timeline to allow for completion of both units 3 and 4 by December 31, 2020.

This PSC action provided more certainty concerning the prudence and collection of project costs for both the company and investors. At Southern Power, we've already announced the acquisition of the Bethel Wind Energy Center.

This 276 megawatt facility is now in service and places Southern Power's ownership in renewable generation resources north of 3,200 megawatts. In addition to wind project, natural gas generation under long-term contract remains a priority for Southern Power. As you recall, we acquired the Mankato combined cycle facility last year.

The Bethel Wind project and the expansion of Mankato represent approximately $600 million of Southern Power's $1.5 billion growth capital for 2017.

At Southern Company Gas, yesterday's approval of Atlanta Gas Light's GRAM rate, that's GRAM rate structure by the Georgia PSC is yet another example of a constructive regulatory framework for our premier state-regulated utilities.

This forward-looking mechanism will provide timely recovery of important infrastructure and growth investments in Georgia over the long term. In addition, Southern Natural Gas recently filed a proposal with FERC for expansion of the natural gas lateral that serves Plant McDonough-Atkinson in Georgia with an estimated investment of $240 million.

Our 50% share of this investment, $120 million, is part of the $300 million placeholder CapEx we included for pipelines in our Analyst Day materials.

In 2016, by expanding our premier state-regulated utility portfolio, continuing to invest in energy infrastructure projects under long-term contract and financing our 2016 growth on very favorable terms, we were able to extend our EPS outlook to five years with an EPS growth rate of approximately 5%.

Our EPS outlook is resilient to a variety of different outcomes and supports our regular, predictable, and sustainable objectives. And subject to board approval, that should enable us to follow-through on the dividend policy we outlined at our Analyst Day in October. I'll turn the call over now to Art for a financial and economic review..

reducing the corporate tax rate, expensing of capital expenditures and eliminating the interest deduction. Each of these elements impacts customers and shareholders in different ways and it is far too early to know exactly how these proposals might be implemented, or exactly what, if any, transition rules would be established.

Having acknowledged that uncertainty, let me share some potential impacts of the major tax reform proposals under a few different scenarios. We estimate that the administration's proposal would be slightly accretive to EPS through 2021.

When considering the three major elements of the Republican – House Republican proposal, the impacts could range from slightly accretive to approximately 5% dilutive through 2021 depending on the underlying assumptions. In all of our House Republican plan scenarios, we have assumed a 20% tax rate.

However, there are a wide range of assumptions related to capital and interest deductibility. Our worst-case scenario assumes no interest is deductible and there are no incremental investments to offset potential rate-based reductions relating to deducting 100% of capital.

Our best case assumes interest on existing debt is grandfathered and that incremental capital projects offset reductions in rate base. We are engaged with policymakers regarding tax reform on several fronts.

Our priorities are preserving both the interest deduction and current tax treatment on CapEx as well as ensuring fair and comprehensive transition rules. I will now turn the call back over to Tom for his closing remarks..

Thanks, Art. Before we open the call up for questions, I'd like to briefly address our two major generation projects. Progress at Vogtle 3 and 4 construction site continues and the actions of our contractor are indicative of a focused commitment to improve productivity in critical path areas of construction and to complete projects in a timely manner.

We are closely monitoring the status of Toshiba and Westinghouse. Our fixed-price contract continues to protect customers and shareholders alike. Westinghouse has provided us with an updated schedule that reflects commercial operations date of December 2019 for Unit 3 and September 2020 for Unit 4.

The company is currently reviewing this schedule in an effort to confirm that these projected dates align with our expectation. The prudent settlement approved by the Georgia PSC in December provides flexibility to accommodate these schedule changes. You will recall that the PSC order prescribes the completion of both units by year end 2020.

And we are seeing improvements in productivity and believe this momentum will be sustained given the recent announcements by Toshiba and WEC. At the Kemper Project, we achieved integrated operations of both gasifier trains and combustion turbines in late January.

Following a short outage in early February to make modifications and improvements to clean the gas cleanup systems, the plant returned to integrated operations of both trains including the capture of CO2 and the production of sulfuric acid and ammonia, all of acceptable quality under the related off-take agreements.

On Monday; however, Mississippi Power determined that an outage to remove ash deposits from gasifier B's ash removal system was necessary. Gasifier B has been producing syngas 60% of the time since November of last year.

During the outage, gasifier A and combustion turbine A are expected to remain in operation, producing electricity from syngas as well as producing chemical byproducts. As a result of this latest outage work, we are currently expected to reach sustained operation and place the full IGCC facility into service by middle of March.

Mississippi Power expects to file for an accounting order from the Mississippi PSC that will allow deferral of depreciation and operations and maintenance expenses of approximately $25 million per month pre-tax for the assets placed in service until rates are in place. Our 2017 EPS guidance assumes receipt of this accounting order.

In the coming months, Mississippi Power expects to file for cost recovery with the Mississippi PSC. We plan to file both a traditional rate case and an alternative multiyear rate mitigation plan, as provided for under Mississippi legislation passed in 2013.

Our goal is to achieve an outcome that balances the interests of customers and investors alike, an objective which often presents challenges. Our commitment to the financial integrity of Mississippi Power and Southern Company has not changed.

As we have done to-date, Southern Company expects to maintain a capital structure and credit metrics for Mississippi Power supportive of investment grade ratings. Likewise, we plan to continue targeting a minimum 16% FFO to debt metric over the long term at The Southern Company level. Moreover, our overall objectives as a company remain constant.

We continue to believe that focusing on the customer, operating premier state-regulated utilities and investing in energy infrastructure projects under long-term contracts will continue to support regular, predictable, sustainable, long-term earnings and dividend growth for our investors.

Our tremendous successes in 2016 provided the foundation for a resilient financial outlook, including approximately 5% growth in earnings per share. Operator, we are now ready to take questions..

Our first question coming from the line of Jonathan Arnold with Deutsche Bank. Please proceed with your question..

Hey, Jonathan..

Hi, guys. Good afternoon. I had a question on Kemper. And I guess in your last Form 8-K, you referenced the economic viability analysis that you were going to update and I believe the Form 8-K says that this has been negatively affected by cost and the lower gas price forecast.

Can you give us any more specifics on what negatively affected means?.

the real result is due to the reduction in the long-term gas price forecast. That's the overwhelming change, the big change. Obviously, there are others. It is a point in time. When we had this plant certificated, we all thought that gas prices were going to be double digits and there was some spread that were way higher than where we are now.

And recall again, and it was interesting. I actually went back in conjunction with this last board meeting we just had, as I started to think about the whole regulatory situation and recovery. And going back to 2008 when this plant was first filed for in Mississippi, it was really structured as a gas-price hedge.

In other words, we saw volatile and high gas prices and nobody figured that gas prices will fall this low. But at the time Mississippi was looking at being exposed to 70% gas generation and 30% coal, adding Plant Ratcliffe, Kemper County to the mix gave us kind of a third exposure to gas prices, a third Kemper and a third coal prices.

Interestingly, Mississippi's customers have been able to benefit from the dropping gas prices along the way because, as you know, our combined cycle gas turbine has been in service and has been having an operations profile much better than what you typically find in the United States; so all that to say is it's an input.

The big change is really related to gas prices. Obviously, operating costs did go up since 2015 about $40 million a year, but it'll just be part of the input that goes into the evaluation of recovery.

I'm very happy to say that once we achieve in-service, we will be able to give the regulators and the customers of Mississippi essentially what was certificated back in 2010..

Tom, let's follow up on that.

Is there a scenario where the sort of lack of green boxes causes someone – is there a determination to be made that it would be better for customers just to run this as a gas plant?.

Yeah, Jonathan, I suppose there's a million different scenarios we could evaluate. The good news is and you folks know as well as we do and it's been a painful process.

Getting to this point, we certainly have taken our lumps, but we have delivered what was certificated back in 2010, I think we will, and we'll see how that goes, based on the order, we're going to give them what was required for us to build and we'll see how that discussion goes.

Certainly there's a lot of different ways the regulatory process could unfold from there, but that's our starting point..

Okay, Tom, thank you for the full answer. I appreciate it..

Yes, sir. Thank you. Always appreciate you calling in..

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

Hey, Julien..

Hey, good afternoon..

How are you doing?.

Quite well. Thank you very much. So perhaps just to kick it off where Jonathan left it. Can you elaborate a little bit more on this filing in Mississippi around the $25 million a month? What's the timeframe for that to kick into effect, what should we be tracking there... (28:27).

Yes, exactly, sorry, apologies..

Yeah. That's all right..

Is that a good leading indicator on thinking about ultimate recovery of Kemper in a future rate case?.

Yeah, I really don't think it is, to be honest with you. It's interesting. So once we go in-service, we think on a pre-tax basis, the run rate's about $25 million a month. What it will be – when we file for tax and accounting in-service is essentially prescribed by accounting and tax rules.

So when we hit that level, we think that four or five days of continuous integrated operation will make that determination.

We're having some conversations with the Mississippi staff about what the kind of threshold for our operation will be in order to get the accounting order, but everybody should understand that whether these costs fall inside an accounting order or outside, until we get an accounting order, they will all be subject to review and recovery under the rate filings.

So really just has to do with the accounting presentation in the meantime. I think the general thrust of the staff is that they want to see more sustained operation as yet undefined beyond what's required in order to call this thing in-service for tax and accounting purposes. We're having those discussions now..

Awesome. And then moving back to the other side of major project. You discussed productivity trends going well thus far.

Where are we in that kind of hiring process ramping up? Are we almost done with that? And then just to be clear about what you said earlier, I assume that between any kind of liquidated damages from the consortium and the fixed price guarantee that ultimately, there's fairly limited changes to your or customer-incurred costs as a result?.

Yeah, I think there's almost no changes to incurred costs. I mean, it's pretty clear. We've been meeting with management. In fact, Steve Kuczynski, our CEO of Nuclear and I met with, I want to say Westinghouse's Chairman, Toshiba's Chairman, I think the President of Westinghouse in D.C. in December, Paul Bowers and the team there.

He's our CEO of Georgia Power, have been meeting with management all along the way. So you should view us as having a reasonably continuous contact with management. It's very clear to us. I think it's clear to the contractor that all these issues, especially issues related to productivity at the site are for their account.

In all the media releases that you have seen, there has never been a dispute raised to that effect. The predicate of your question was just a wee bit off, though. One of our predicates of the question was that staffing wasn't where it needs to be. Really, staffing is, Julien, I think the bigger issue there is productivity of the staffing that exists.

And interestingly and I think we have a slide in the deck – did we find a slide in the deck? It's page 23 that – and it's in the appendix. It shows the productivity, if you will. It's a productivity-looking slide, anyway, of various activities that were accomplished in Unit 3 and then the duration of those activities later for Unit 4.

And what you can see by that chart is effectively true that broadly, productivity at Unit 4 is a lot better and we're learning a lot from having undertaken activities at Unit 3. So that's why you see the difference in the change in schedule from six months and three months. It really has nothing to do with the amount of staffing on site.

The amount of people we need are on site. Further, we believe Westinghouse is pulling in the best nuclear construction people and project management talent from all over the country to augment their efforts on site particularly in the nuclear island.

And so, they are all about trying to improve their productivity and improve their own financial results..

Got it. That's fair. And then, yeah, just confirming that there is no – it changed for consumers, right, and yourselves, more importantly..

Yeah. No. In fact, what you should – the way I think about LDs (33:12) is they really offset owners' costs for any delay..

Right. Thank you very much..

Yes, sir. Thank you..

Thank you. Our next question coming from the line of Michael Weinstein with Credit Suisse. Please proceed with your question..

Hey, Michael..

Hey, guys. So I just wanted to confirm that I guess V.C.

Summer is going to be, looks like a few months behind you, right, so you're ahead of them by about three to four months; is that right?.

You ought to ask them that..

All right. Do you think that – all right. So you don't have any opinion as to why you guys might be a few months ahead of them or whether....

We really try to stay away from those things. I think we're much better served paying attention to our own project at this point..

Okay. And there's no change to the cost of the projects as far as you can see....

Not to us, not cost to our customers, no..

Yeah. Okay. And....

And the schedule remains within the prescription that we settled that was agreed to by the Public Service Commission in the settlement and the prudence hearings..

Right.

Has there been in any movement on the IRS review of tax credits or anything like that at this point?.

We're waiting on the Congressional tax committee, joint committee of Congress, and we believe that sometime in the first half of this year that we should hear something from them..

And you're referring to the Section 174 deduction?.

Yeah, that's the Section 174. I assume, Michael, that's what you're asking about..

Right, right..

For Kemper. Okay.

Not for Vogtle, right? Kemper?.

Yes..

Okay..

All right. And I guess that's about it for now. Thanks..

Thanks buddy..

Thank you. Our next question coming from the line of Anthony Crowdell with Jefferies. Please proceed with your question..

Anthony, how are you?.

Another way in sell-side paradise.

How about yourself?.

Absolutely, my friend..

How are you doing Frank?.

Hey, it's better. The last call, I got called Steven, so Frank's not that bad..

Or Bill or whatever..

Just obviously everyone's hoping for a great outcome at Kemper, the company's been making progress.

But is there a scenario that happens at Kemper where Southern, the parent, no longer supports the operating company?.

We've been over that a lot. We try to evaluate every potential card that could get turned up on the table here. It's our belief that we will maintain our support from Mississippi Power in the manner that we have described. It's just not in anybody's interest to consider in any serious way something other than that..

Great. Thanks for taking my question, guys..

Yes, sir. Thank you..

Thank you. Our next question coming from the line of Michael Lapides with Goldman Sachs. Please proceed with your question..

Hey, Michael..

Hey, guys. Congrats on a good end of 2016 and nice start to 2017. Real quick on Vogtle and then I'm going to turn to Southern Natural Gas for a second. On Vogtle, the projects are getting closer, meaning the Unit 4's in-service date is, I think, you said September 2020.

What happens if this pushes out another couple of months into 2021? How should we think about the risk to things like production tax credits or – meaning the ability to qualify for them or for things like bonus depreciation treatment for Vogtle 3 and 4 if they come on line after 2020?.

Yeah, so I'll hit production tax credits and let you do bonus, but, listen, our team in Washington is working really hard to get an extension for the two projects that are under construction. And so we're working that angle and we think actually there is a good vehicle, good circumstances in which to make that happen.

The second thing that I would say to you is this six-month and three-month kind of extension to the schedule. If something we're reviewing, when you look at that slide that I showed you, our – that I talked about before, yeah, page 23, Vogtle Unit 3 versus Unit 4 duration.

Our position has been that, gosh, we ought to be able to hit Unit 4 really pretty well on – without any kind of three-month schedule extension. I think the schedule extension there may do more with staging work among or between the different units rather than the productivity we're seeing at Unit 4.

So I think Unit 4's schedule remains absolutely under discussion and we'll see where that goes. Over the next month or so, we're kind of tying the proposed schedule change to what the lower-level schedules would indicate right now. We have to make sure those things all gee-haw, if you will.

So that'll be the topic of a lot of review over the next four to six weeks. Art, do you want to talk about bonus? I'm sorry, go ahead, yeah..

Well, just on the PTC, is the goal to try and get an extension in the PTC date kind of as part – a part and parcel or an amendment to some broader tax package or is this going to try and get this done in some separate type of legislation?.

We've actually had a lot of different kind of ways to do this. We'll see. And then – let me just tell you there's a lot of support in Congress for this. This is not an adversarial or any kind of controversial thing. Getting stuff done in Congress, as we all know, is hard, so – but it's got a lot of support. But my....

Got it. Thank you, Tom..

Yeah, Mike..

Yes, Art, yeah..

Do you want to know about bonus?.

What happens if the plants come on line post 2020, what's the treatment for bonus D&A if they don't meet an end of year 2020 in-service?.

I believe it's zero..

Okay..

Of course, all that's subject to change under what's being proposed, so we'll see what happens..

Understood. And then finally, Southern Natural Gas, you introduced the new lateral off of the pipeline where you're a 50% owner with a large midstream company.

Do you see a lot of other opportunities like that and do you see those coming to fruition over the next three to five years, meaning bolt-on projects, bolt-on laterals or even storage, or is the growth, kind of the bigger growth off of that pipeline, off of that position more longer term than that?.

Yeah we – I think we did at our Analyst Day, we outlined $300 million of opportunity and this is a piece of that $300 million. And we're looking at other opportunities jointly with Kinder Morgan on opportunities just like this..

Beyond the $300 million placeholder, if you go back to Rich Kinder's analyst call after we announced the acquisition of 50% of Sonat, he referred to a lot more growth opportunities. We support those things. We're aware of them. We're working with him where it makes sense. None of those additional growth opportunities are in our financial plan..

Got it. Thank you, Tom. Thanks, Art..

Yes, sir..

You bet, thank you..

Thank you. Our next question coming from the line of Ali Agha with SunTrust. Please proceed with your question..

Ali, welcome..

Thanks, Tom. Good afternoon..

Good afternoon..

First question, Tom, just wanted to clarify your earlier comments, this economic viability test at Kemper, so just to understand, is this one of the tools that the Commission is going to use to determine what investment gets recovered as part of the rate case filing? And this last test where you had the three in green boxes, is that really what goes in front of them when they're doing that analysis or will there be any updates to this?.

Well, I mean it's just another piece of input that goes into the process. It's nothing more than that. We know that gas forecasts have changed a lot over time.

And with respect to whether we should recover it or not, I don't think – I mean as a matter of fairness, I cannot imagine that the company is going to be held accountable for changing gas price forecasts.

We all entered into this certificate, this order from the Commission in 2010 with the understanding that this was a gas hedge and, in fact, it remains a gas hedge. There are still green boxes on the economic viability analysis which would indicate that under certain scenarios, this is a very economic thing to do.

And let me remind you, if you had 2015's gas forecast instead of 2016/2017 gas forecast, you would have six green boxes. So, just because you have this more recent snapshot of what we believe about the future, which we all know has changed dramatically over time, that does not mean anything about the imprudency of costs incurred..

Okay. And then switching to Vogtle, as you said, you've been, obviously, closely in contact with Toshiba, Westinghouse.

Just remind us in the scenario that for whatever reason Toshiba's financial health implodes further or they are no longer committed, what are the backstops and what would be the scenario if they cannot complete the rest of their obligations?.

Well, Ali, some of that is public, but they are – we have every reason to believe that Toshiba is going to remain viable. They have recognized the fact that they do have an obligation as a parental guarantee under these contracts.

We believe it's in their best interests from an economic perspective to complete these projects and our expectation is that they will and that's what we've been communicated to by them..

And if you think about it, when you look at the credit banks that support Toshiba and the government, they own about 20% of the stock. Further, there's about 170,000 employees in Japan and elsewhere that are impacted by the viability of Toshiba.

Further, the nuclear renaissance in Japan, such as it may be, the cleanup from Fukushima and then restarting other nuclear reactors, Toshiba has a central part of that role for Japan. They're just an important player in the economy and we continue to get feedback that Abe's administration supports Toshiba.

Two other financial facts; one financial fact. We have and we've disclosed this I think a lot, almost $1 billion, $920 million of letters of credit and further we have a multibillion-dollar guarantee to Toshiba the parent.

So there's a lot of reasons why we believe, including Toshiba's own statements and moves that are now in the press that I should just let you look at in the press rather than me comment them that Toshiba's taken hard steps necessary to improve their financial viability and that they remain committed to these two projects.

Ultimately, success on Vogtle will inure to the success of Toshiba long-term..

Fair enough. And last question we've been seeing consistently, Tom, the weather-normalized sales have remained negative, in fact got a little worse in the fourth quarter, negative 1.5%.

I know you alluded to some of this, Art, perhaps in your commentary, but what is causing this consistent negativity and what's the optimism that we see, at least flat, if not slightly better as we look at 2017 and beyond?.

Yeah. It's really this and we're seeing it at the Fed, too. I'm not going to mix (46:21) the data for you, but the strength of the dollar has slowed exports, number one. Number two, low oil prices have slowed things like expansion of pipelines and a variety of other things. So we have seen already those effects weigh on industrial sales.

In the commercial sector, we've seen real improvement in terms of office occupancy and a variety of other measures. But there is a secular change, we think, going on in the commercial sector really related to ecommerce that is changing the nature of big-box department stores particularly.

Further, we are seeing things like energy efficiency take a lot bigger share, particularly lighting and HVAC, from the commercial sector.

On the residential sector, we're seeing, we think, at least for now – of course, that sounds kind of weird, for now a secular change, but a secular change away from kind of primary housing in the 70%-30% to multifamily more to primary 60%, multifamily 40%.

We think those things may be generational, in other words, the younger generation not wanting to get tied down under a mortgage and home ownership and actually prefer the flexibility of apartments. It could be still people under recovery.

It could be people not wanting to extend their credit risk from a household standpoint and we have seen at the Federal level larger savings rates in the household income level. All of those things would suggest that the residential buying power isn't what people had hoped it would be in the past, say, three years.

The good news is that we still see an influx of customers into the Southeast. And when you think about it, not just the Southeast; if you add together Southern Company Gas and the traditional electric operating companies at Southern Company, you're talking about 70,000 new customers. We went from 4.5 million customers to 9 million customers.

And one of the things we're definitely looking at is how do we increase the margin, how can we increase more sales and more value associated with having a customer, whether we sell either therms or electrons in front of the meter or whether we put energy infrastructure on the other side of the meter.

Fortunately, this thrust on the other side of the meter is happening outside our territory, high price, low reliability, low customer satisfaction areas. The Southeast remains a bastion of strength in that regard, low prices, great service, great customer satisfaction.

So, look, what we're trying to do is take advantage of all of our natural resources to improve our own organic growth, but where we're losing organic growth to things like beyond the meter sales or energy efficiency, we're playing offense where we can to improve our posture and gaining value from customers there, whether they're inside our territory or not..

Got it, one last clarification.

The 5% growth over the next five years, that's pretty straight line, it's not front end or back end loaded, is that the way we should think about?.

Yeah it's pretty straight line, yeah..

Okay. Thank you..

Just take the bottom of the range and the top of the range and grow them by time; that's what we showed you in October and we stand behind that. And that permits, assuming the board continues to agree, our dividend policy that we outlined in October as well.

I think that should show everybody in the investment community great strength and belief in our future. And remember, this is not just lengthen, it's strengthen..

Thank you..

Yes, sir. Thank you..

Thank you. Our next question coming from the line of Paul Patterson with Glenmark (sic) [Glenrock]. Please proceed with your question..

Hello, Paul..

Hey, how is it going?.

Awesome.

How are you?.

I'm managing. I wanted to touch base on Vogtle.

So I hear you on the confidence and all the good points you're bringing up on Toshiba and its economic needs, but your partner to the North, SCANA, not your partner, but whatever, the guys who got the nuclear plants as well, they seem to be taking some potential contingency planning with respect to whether or not Westinghouse can complete the project from seeing potentially other contractors or even themselves taking a role.

And I was wondering are you guys looking at anything like that or....

Sure. Look, and again, I don't want to compare to SCANA. I will not do that. I will just tell you about what we're doing and that is, I hope I get these numbers right. We have about 400 people on site involved in oversight and have had that and recall that we've had people all over the world in the supply chain.

I would argue that Southern Company, unlike anybody else in the United States, has the technical depth to be able to step in if we need to and finish the project. Further, we have all the contractual rights with respect to getting IP to make sure that we can run the project successfully, et cetera. We've been through every one of those contingencies.

I think those are way more tail risk than they are substantive, but if they ever become substantive, we are primed and ready to go..

Okay, great. And then with respect to Kemper, looking through this 2017 economic viability analysis, for some reason, I'm not sure if it's redacted, it just doesn't appear to be there, the actual gas price assumptions. And I was wondering if you guys could tell us on the high end what those gas price assumptions are, the ones with the green boxes..

Yeah, I'll give you a point estimate. At 2020, the hygas forecast is a wee bit over $5 per million Btu. So think about volatility and gas prices, could you be at $5 by 2020 conceivably? And then beyond 2020, there's obviously a trend that continues to grow in that manner..

Okay. Now, you guys are clearly in sort of the testing phase and what have you; so you guys want the gasifiers and everything to work. But in the current environment, it sounds like you probably – it would be more economic to run the plant just simply on natural gas and not run the gasifier.

Is that correct or I mean how long would this testing phase sort of go through – would you expect the phase in which you'd have to sort of run the gasifiers just to show that it's working okay?.

You bet, man. Yeah, Paul I got you. I got you. So here we go. So, actually, when we've had the gasifiers kind of ready to go, they've actually been performing pretty well. Like I say, we've been able to demonstrate once they're ready to go, they're in the 50% to 60% availability.

Remember, all we talk about during this first year is something like 35% availability. So who knows what it will be over a year, so I don't want to guarantee anything, but we're actually happy once we get the things up and running and look at the way A is running right now.

The other issue that I think is important and inherent in your question is this notion of what is the energy value of the plant to Mississippi's customers. And I've talked about this a lot in the past and, actually, I've been reasonably conservative in how I've postured that.

I've used, I think, the range of numbers with you all on a gas-price equivalent at about a, I don't know, $2.75 to $3 per million Btu equivalent. That didn't include all of the value of the by-product sales and it really probably hived off more O&M than what our people would traditionally use in a dispatch assessment.

And we have run this thing back through our system planning people. If you do the traditional dispatch assessment and you include the value of all the by-product sales, we believe this thing will dispatch out at about $1.75 per million Btu. So from a used and useful standpoint, this plant has tremendous energy value.

Now, would you rather run the plant, keep it going – it has a rather large fixed O&M component and get the benefit of the energy or would you rather convert and just run on natural gas is kind of the question you'd get to and that underlies, I think, your point. But these are things that we will discuss with the Commission as we file the rate case.

The other thing that that analysis still ignores is what's the value of the plant as a gas hedge? So there is absolute value there. It'll be interesting to see how all that assessment goes forward..

Okay. Thanks so much..

Thank you. Appreciate it..

Thank you. Our next question coming from the line of Praful Mehta with Citigroup. Please proceed with your question..

Welcome..

Thank you..

Hey, Praful..

Hi, thanks, guys. So first question on the tax reform side, the slide you provided was helpful, but wanted to get a little bit more context more specifically at the holding company level.

Could you give us some color on the earnings impact at the holding company level if the interest deduction went away?.

Well, that's included in our worst-case scenario. Obviously, the holding company would be a heavyweight on the downside for tax deductibility and so it's incorporated into that scenario. All we've really tried to do, Praful, is just to outline the top and the bottom scenarios, but there roughly is about $0.5 million a year....

...$0.5 billion..

...$0.5 billion a year of interest expense that's exposed, so, what we've done is project that out to 2021..

Got you. That's helpful. And then as you think about the commercial segment and the additional CapEx at the commercial segment, clearly that is funded with CapEx at the holding company.

So wanted to understand with the tax reform, not just the interest deductibility, but broadly tax reform, how does the commercial segment growth get exposed both from the economics associated with holding company leverage and other tax reform that might impact economics at the project level for the commercial segment?.

Yeah, Praful, when we talk about commercial, we're talking about the commercial class in our regulated business. We're not talking about the unregulated businesses which I think that you're referring to..

If you're talking about....

Yeah, my question is more directed at the unregulated investment..

That's correct..

Well, if you're talking Southern Power, they finance off their own balance sheet..

That's correct..

Not at the parent level..

That's right..

Right, but interest deductibility will still impact the economics; so will other tax reforms.

So what I'm trying to get at is how do those projects and the growth of those projects get impacted by the tax reform?.

Well, listen, I mean I've been walking around the hill on this. I chair EEI and I have a finance background and we kind of go through all these things with all the people that we should, both in the White House administration and Congress, both on the House and the Senate.

And I can just tell you there's interesting nomenclature up there and this notion of eliminating interest deductibility is a grand experiment and has the ability in a very near term to radically change. Of course, this depends on how this thing is factored in over time, transitional, but radically change how America finances long-term capital.

And if we're trying to stimulate long-term capital, I'm not sure that that's the right way to go. On the flipside, you say, well, how can we help on the national income statement? There's this idea about expensing capital. I understand some people like that.

But given the long-term nature of the kind of capital that this industry commits to, whether you give bonus depreciation or not has very little influence on our spending habits.

We really do, for example, Vogtle, Kemper transmission lines, these are long-term trending capital commitments and varying tax treatment over time has very little influence on our behavior. We always do what's right for customers. So when you think about it, it makes much more sense and these things in scoring are really pretty close.

Keeping interest deductibility is about equal to keeping the current tax depreciation and not expensing CapEx. The government is purporting to give us a benefit that really has very little value. So that's kind of where we are on all that.

With respect of Southern Power and what the incremental effect may be, I think we've been awfully famous over the years and enormously successful.

We've done this for the Board, Art, our ex post review of the performance of the portfolio at Southern Power and it even exceeded ex post our review of what was required by our own disciplined IRR approach.

The other thing that you just have to understand is there's a lot of people around those deals right now, particularly tax equity, projects without tax credits. There's all sorts of uncertainty going forward. Just rest assured we'll use the same discipline and my sense is the market will react to that as well..

That's very helpful context.

So just to understand, the Southern Power CapEx, like the $8 billion that you have from 2017 to 2021, do you see any risk with that spend depending on what happens on tax reform?.

Well, there's uncertainty with respect to tax reform. But you should know that by virtue of the agreement that we signed with RES and then ultimately with the turbine suppliers that we have safe harbored our PTCs in the 100%. And you show me, but I am not aware of any tax law change in which they unwound commercial decisions once entered into.

So my sense is from the value of the PTC that we just entered into with that arrangement last December, we think that will persist under any tax reform..

Got you. That's really helpful. Thank you..

Yes, sir. Thank you..

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

Hey, Andy. Great to have you with us..

Thanks, Tom. I appreciate it. I hope everything is good with you all..

Yes, sir..

Just a couple questions. Maybe just – I just have some questions on Kemper and on Vogtle. So on Kemper, the only thing I think that I have left is, in your 10-K, you talk about $105 million of increased O&M annually, possibly I guess on the disclosure here.

Could you just describe that and who would pay for that?.

Well, we have already – are you talking about the 20 – first year O&M, is that what you're referring to?.

It says operations, main expenses have increased an average of $105 million annually and maintenance capital has increased by $44 million....

Yeah..

...for the first full five years of....

Well, we talked about, at the Analyst Day, I think, the fact that we had an additional $68 million in the first year and that we were going to expense those in the first year of operations, so that is included.

As we go through, and I think Tom talked about it already, and look at the fixed O&M cost associated with the asset, that is part of the negotiation that we'll go through with the regulator around what's best option for customers. So it is part of the equation that we're going to through and it's incorporated..

Andy. Yeah. And you may be referring to O&M that was in place, estimated way back in 2000. It actually probably first got filed around 2008, was subject to review in 2009. Part of the order in early 2010 and that dealt with a level of O&M that was estimated at that time.

That since has been updated; in 2015, it was updated to $100 million and then most recently in October, again revised in November of last year, was updated to around $140 million. So the increase over, say, 2015 till now is about $40 million a year. So I think what you're reading is probably from the certificate level..

Right. Okay. So the bottom line is that....

You can't get the benefit.....

...renegotiated....

Yeah. You can't get the benefit of the plant – all those energy savings I mentioned without that O&M, you can't separate the two. And recall also, in 2012 the Commission specified the operational parameters that we're going to have to stand up to. We believe we can hit those parameters. O&M is not part of those parameters.

Those things deal like with availability, heat rate and by-product sales and something else..

Okay. And then I guess this issue about removing ash deposits has kind of plagued, maybe I'm inaccurate, but have plagued both gasifiers.

Can you maybe just describe kind of what that issue is, again not in a long way?.

Yeah, I'll do it in a short way, the very short way..

How does that get resolved?.

Yeah, sure there were really two different kinds of issues. But one of the things we've always said about this was, if you remember one of the big technical risks was lignite in, ash out, that was kind of one.

And then the other one you may remember from years past and you've been around us for a few years is this notion of the instrumentation and getting all the digital controls synchronized. Remember this is a pretty complex plant.

I'm happy to say all the instrumentation has, even though it's complex, has really performed terrific, so we haven't had hardly any problems with that. With respect to lignite in and ash out, I think we've – part of regular start-up practice is to iron out all the bumps in the roads.

And I think you may remember from all the conversation in the past about lignite dryers and all those other stuff, we solved lignite in. Ash out, we've kind of had two different kinds of problems. This one recently is a really different one. Okay.

The outages that we took in the fall were related to clinkers and what they dealt with was ash that was melted due to some temperature excursions as we brought the plants into and out of service. We think we've solved all of those problems.

This latest problem really dealt with the notion that on Train B, I guess, we started and stopped it about 7 or 8 times and this is – they use the word agglomeration. But if you can imagine, there are vertical and horizontal pipes in this plant.

And what we have seen is, when you turn the plant on and off, the fluidization inside the circulating fluidized bed boiler stops. And whatever ash is in there will sit on a horizontal pipe. And what they think happened in this latest run was that some of the ash just started sticking to each other.

When a plant is running and the velocity of the ash is going through the plant, it doesn't stick and it performs exactly the way you want it to. They think it just stuck together, so they're going to take the plant out of service, get it out, start it up, and they think it'll run fine..

So is that like more of a – I guess, obviously it's an engineering issue, but it's trying to predict kind of the right heat to use?.

Yeah. But we've done that. That's the early problem and they've solved it. And one of the advantages – just to remind you, this thing runs at a lower temperature, therefore less O&M. You don't have clinking and scaling and its operational performance should be better than a conventional boiler..

Okay. I think I understand it. I guess we can talk more about it next week. And then – up in Boston and then up....

Yeah, great..

Yeah, that was exciting. And then....

Although we don't want to go to Boston, you know..

Okay. It's all right; I wish the Giants got that far. And then on the Vogtle side, so just to understand, I guess you have this letter of credit. And I have gone over it with IR, but I just want to make sure that I'm clear on it. This letter of credit which is $920 million or $930 million and your portion of that is 45% of that.

That expires every July, is that right, and then needs to be renewed? Is that correct or is that incorrect?.

I believe that the banks are in the position to renew it automatically every year. If they fail to renew it, there's a 60-day notice on the bank's part to let them know they're not going to renew. We have an option if they do that and that Toshiba can't replace the LOC to draw on a 30-day notice.

So we're in – we think we're in good shape around all that..

So there doesn't have to be a default, which is right now why – when you would draw that if it....

It's kind of one of the conditions. I wouldn't call that a default, but if the....

No, no, that wouldn't be a default. But if they fail to, so obviously, you know, forget them pulling it, right, the bottom line is if there's a default or something like that, you obviously could draw on it..

And just recall the reason they had to post these letters of credit is because their financial condition fell below a certain level. So long as their financial condition is at that level, they have to provide LCs or they're in default..

Right, but if the banks decide to pull it, you within that 30 to 60-day window of when you're informed, you can actually draw on that letter of credit; is that correct?.

That's it..

Correct..

Right, okay.

And then do the banks I mean, I guess who's money is it? Is it Toshiba's money or the bank's money that is that 900 and whatever million dollars?.

It's our money at that point, pal..

No, no I get that part, I'm saying but right now. It's a bank guarantee, right? Right the banks go over Toshiba, right? You get the money..

It's the bank's money. It's the bank's money and Toshiba is a creditor to the bank..

Yes..

Right.

And is there a scenario where the banks just decide not to pay you or is that kind of out there farfetched type thing?.

That's pretty farfetched, my friend..

Okay. Okay. And I think that's it.

I actually – in a bankruptcy situation for Toshiba, how does your fixed cost contract kind of work? And I guess the letter of credit stands; so that's fine, but do you just become a creditor or is there any type of backstop in that type of scenario?.

We have the LCs and other than that we're an unsecured creditor..

Got it..

We just think that's really unlikely..

The bankruptcy or the unsecured creditor part?.

The bankruptcy part..

Okay. Got it. Thank you very much..

Thank you..

Thank you, Andy..

Thank you. Our next question coming from Paul Ridzon with KeyBanc. Please proceed with your question..

Hello, Paul..

Hello, Tom, how are you?.

Awesome, hope you're well..

You got that Hinkley yet?.

Hey, man, I'm working on it. I'm working on it..

You're working on a few things I guess?.

Yes. No kidding..

One of the Form 8-Ks a few months back talked about sustainability of nitrogen with Train A and Train B simultaneously.

I assume that's been fixed or you wouldn't be this far?.

Yes. Here is the deal; we need supplemental nitrogen in order to basically start up both trains. But we have the technical performance profile that once we are in operation, we don't need to supplement nitrogen that we are able to run the process and the nitrogen on site is sufficient..

And back to energy efficiency. You keep seeing usage per customer decline.

Does that plateau or is technology kind of keep moving the bar on you enough that this can go on for several more years?.

That's an interesting question. And I think you'd have to talk about different markets. In the commercial market, we think it may have a little ways to go. In the residential market, it's just a matter of change-out of appliances and how many new multifamily units are in place versus single-family homes. So that ebbs and flows over time.

And I think we're seeing a slowdown in construction of apartments at this point. And whether that morphs into more single-family homes, we'll just have to wait and see. But there is kind of a natural slowing down of this effect as you replace out HVAC and lighting, particularly in the commercial sector.

So my sense is the rate of decline would slow to zero eventually. It will approach a limit as inefficient equipment is replaced with efficient equipment. And then your profile of growth really goes to two things. One is adding more customers and the other really goes to things that relate to electrification.

Whether that's electric transportation or whether it's feeding the digital economy, I think there's lots of reasons why we should expect organic growth of electricity to be reasonably resilient going forward once we account for energy efficiency..

I think another driver, Paul, would be the fact that bonus – remember, 50% bonus was passed at the end of 2015 and companies are seeing low interest rates. They're using bonus. The payback on these kinds of improvements get to be pretty quick and so that may be driving some of it in the near term..

So bonus is – has acted to accelerate the swap-out?.

Well, that's a theory. Whether they're actually doing that or not, I'd just say that it certainly would be a piece of low-hanging fruit..

And just to contrast with my earlier comments about tax benefits like that impacting capital decisions, Art's right. Bonus and those kinds of things typically impact short-term flexible investment decisions, discretionary capital as opposed to long-term committed capital that we would incur with a plant or a transmission line..

Got it. Makes sense. Thank you very much..

Yes, sir. Thank you..

Thank you. Our next question coming from the line of Dan Jenkins with State of Wisconsin Investment Board. Please proceed with your question..

Big Dan, how are you?.

Good.

How about you?.

Awesome..

So, have a couple questions; first around Vogtle.

The CapEx schedule that you lay out on slide 17 for new generation there, does that reflect the updated schedule you got from Westinghouse or did you not have time to reflect that yet?.

No, no change for that yet..

Remember, we're still reviewing what they're doing and it's going to be a month and a half or so before we kind of get to the bottom of what they're suggesting right now. So there is a lot of uncertainty with respect to their schedule right now in terms of our agreement to it..

Okay. I assumed that, but I just wanted to verify that that was the case. In terms of Units 3 and 4, I was wondering if you could let us know what the current critical path items are for each of those units..

Yeah, still the critical path goes through the nuclear island, so on Unit 3, we are now morphing beyond just concrete and rebar. And we're moving into installation of equipment. We installed the reactor vessel. I guess in the near term on Unit 3, we're looking at steam generator installation, at least the first of two.

We'll begin the reactor coolant piping. And then I guess a little later this year, we'll get the second steam generator in and then the initial energization of Unit 3 site is a big deal and that should be on the horizon as well. Unit 4, we're still putting module walls into the reactor vessel of Unit 4.

They're still pouring concrete in certain areas and setting those last modules inside the containment vessels or containment buildings so that that's just part of the process of where they are, and I think Tom showed you the productivity of that unit compared to Unit 3. So we're well along our way in Unit 4..

Are there any of those key components that have yet to be delivered on site or do you still have some that are being fabricated off site?.

No. No, no, no. Everything is on site as part of – as well as I'm aware and I believe it's just getting concrete to a certain level and making sure that you're doing things in an orderly manner to support the new placements..

Okay. One other issue I was wondering about is I know SCANA in one of their filings mentioned a concern they had with the ITAAC submittal process and the amount of support they were getting from Westinghouse related to the timeliness of that..

Yeah. I mean, we love our brothers and sisters in SCANA. I would argue that our perspective on that is a wee bit different. We have led the charge in working cooperatively with the NRC to put in place something called UIN, Uncompleted ITAAC Notices. If you can imagine what an ITAAC is, it's a checkout of a system in the plant.

And what we've done is essentially when you finish a system like in your house, the HVAC, you'd submit it, the test and the test results, so it's the process of the test and the result of the test and it would be checked off as completed. We saw – this is some years ago in ICU, (79:33) this is one of our big risk factors.

We saw a bow wave, if you will, of these ITAACs going forward. And so, what we did was worked with the NRC to develop this UIN, Uncompleted ITAAC Notice procedure, where we will essentially outline and get the NRC to agree to the process, leaving a blank for the ultimate result of the test.

Now, what that does is take an enormous amount of review off the forward calendar and puts it right here, so that when we get the test, fill in the blank, boom, check the box and move forward. The other thing that we have been working on lately is consolidating some of the ITAAC.

So what's the number, 892 or 75 per unit? We think we have a way forward to knock off 200 of those per unit, just by consolidating some things that otherwise look duplicative. So I think we've made a lot of headway there.

If you go back and listen to what I've said now in these past few earnings calls, if ITAAC is one risk factor and productivity is the other, I would put the productivity risk factor at this point as much more important than the ITAAC risk factor. Still bears watching; we're still all over it.

I would just pay more attention to productivity than ITAACs at this point..

Okay. Good. Then the last thing I wondered is, if you could just give us a feel for on your financing for 2017 that you have on page....

Yes, I believe there's a slide in the appendix, Dan, that outlines our 2017 financing plan..

Yeah.

Just wondering, though, for those numbers, are those pretty much spread throughout the year for the various units or if it's some more front loaded or back loaded?.

I don't have the schedule in front of me, but we can get that information to you..

Okay. That's all I had, thank you..

Okay..

Thanks, Dan, always good to talk with you..

Thank you. Our next question is a follow-up question coming from the line of Michael Weinstein with Credit Suisse. Please proceed with your question..

Hello again..

Hey, just one last question.

With the liquidated damages being triggered by nuclear fueling at the end of the year for 2018 for Unit 3, 2019 for Unit 4, has the proposed delay from Westinghouse, do they exceed that? Is this something that's going to be negotiated as you review whether to accept or reject the changes that they've proposed?.

I suppose you could negotiate anything, but right now, that schedule would trigger liquidated damages..

It would. Okay..

If you believe that schedule, sure..

All right. I just wanted to make sure about that. All right. Thank you..

We've made no contract amendments at all..

Got you.

And then liquidated damages was specifically applied to the owners' cost, right, the $6 million a month plus $30 million of financing?.

No, it's just one way to think about it. It's not applied to anything; it's just cash to us..

Just in general, okay..

Yeah..

All right. Thanks..

Thank you..

Thank you. And our final question coming from the line of Ashar Khan with Visium Asset Management. Please proceed with your question..

Hello, Ashar. Great to hear from you..

Hi, how are you doing? I just wanted to – one thing that was written in the 10-K, if I can just read it out and if you can just help me a little bit on the definition of one of the words..

Yeah, please do, yeah..

Mississippi Power has evaluated various scenarios in connection with its process to prepare the 2017 rate case. And Southern Company and Mississippi Power have recognized an additional $80 million charged to income, which is estimated minimum probable amount of the $3.31 billion of Kemper IGC costs not currently in rates.

That would be recovered under the probable rate mitigation plan to be filed on June 3, 2017. Tom, can you tell me – I don't know, can you guide us a little bit? What is this minimum? Is it 10% or 15%? I was trying to get a better sense of this minimum language that you used, which corresponds to this $80 million write-off..

Yeah, yeah, yeah. Let me tag team it. The first thing is let me make sure you get the context right. So the traditional rate plan is something that we will file. The rate mitigation plan is designed for us to hit as precisely as we can the revenue requirements that were contemplated under the original certificate.

And I've said it to you all before, not only does the rate mitigation plan give us the economics that the Commission thought they were getting when they certificated the plant, they will have a plant that operates under this original certificate, so that's kind of the big picture.

Part of that rate mitigation plan assumed essentially not asking for recovery of depreciation, amortization on the 15% uncovered portion of the plant..

That's correct. Ashar, you'll remember the plant was certified at a 100% level to be entered into agreement to sell 15% of it. That was undone since, but the rate mitigation plan that we will file basically does what Tom outlined, it recognizes that we won't charge Mississippi for the depreciation/amortization of the 15% of the asset for five years.

And that's what the $80 million represents..

Okay. Thank you so much. That clarifies it. Thank you so much..

You bet. Always great having you..

Thank you. And at this time, there are no further questions.

Sir, are there any closing remarks?.

Just want to say this. I know we have Vogtle and we have Kemper, but if you kind of look past these headline items, we're at a really important point here, so we tried to stress in our October presentation.

You think about our earnings that we're forecasting forward as we said in October, $290 million to $302 million with a midpoint of $296 million, when you look at the operating companies that are state-regulated, something like $278 million of earnings of the $296 million are coming from those entities.

And that does not account for the long-term contracted bilateral contract that has served us so well for so long and have a risk profile similar to those state-regulated entities.

I think from a risk-return standpoint and therefore a value accretion standpoint, Southern Company has lengthened, strengthened and improved its value position going forward. We'll get Kemper started up. We'll go through the regulatory process. We'll continue to make progress on Vogtle.

And I think from an investor's standpoint, we're as good as we've been in many, many years. We appreciate your attention today and we look forward to talking with you soon. Take care. Operator, that's all I have..

Thank you, sir. Ladies and gentlemen, this does conclude The Southern Company Fourth Quarter 2016 Earnings Call. You may now disconnect. Have a great day..