The Southern Company Annual Report 2014

Plain-text annual report

Southern Company 2014 Summary Annual Report Doing Energy Better MAKING It Better Southern Company is committed to the development of the full portfolio of fuel sources for energy generation: New nuclear, 21st century coal, natural gas and renewables such as wind and solar, deployed in tandem with an emphasis on energy effi ciency. By utilizing a variety of technologies and abundant natural resources, this environmentally responsible approach ensures that our subsidiaries’ ability to produce clean, safe, reliable and affordable energy is not reliant upon any single source of generation. [ See Page 6 ] Mark Rauckhorst, Construction Vice President (left), and Vanderian Floyd, Performance Improvement Manager (right), assess construction of Vogtle units 3 and 4 at Georgia Power’s Plant Vogtle. MOVING It Better We take great pride in our ability to deliver electricity throughout our system with industry-leading reliability. Southern Company has invested nearly $7 billion in smart grid technology that gives us the means to both predict and adapt to the variable energy needs of customers. No less important are the dedicated line crews who work diligently through all kinds of weather conditions to maintain the transmission and distribution network. [ See Page 12 ] Southern Company 2014 Summary Annual Report 1 So Customers Can USE It Better Everything we do to make and move energy better is ultimately for the benefi t of customers. But generating electricity cleanly, safely and effi ciently and delivering it to the grid is only part of our mission. We work hard to maintain exceptional reliability and to keep rates affordable. Our traditional operating companies also work directly with customers to help them fi nd better ways to manage their energy consumption more effi ciently. [ See Page 18 ] C o n t e n t s Letter to Shareholders .................................................. 3 Shareholder Value ....................................................... 24 Financial Highlights ...................................................... 5 Summary Financial Review ......................................... 26 Making Energy Better ................................................... 6 Board of Directors ...................................................... 32 Moving Energy Better ................................................. 12 Management Council .................................................. 34 Using Energy Better .................................................... 18 Glossary ..................................................................... 36 Southern Company 2014 Summary Annual Report 2 Thomas A. Fanning Chairman, President & CEO Southern Company Dear Fellow Shareholders, Southern Company’s franchise operations have never performed better than they did in 2014. We continued to provide the most outstanding customer service in our industry. In terms of system reliability, we continued to set–and raise–the bar. We grew our portfolio of wholesale renewable assets and made signifi cant progress on major construction projects. In these and many other areas, Southern Company’s franchise business and to position Southern Company for continued success in the years continues to lead the way as we strengthen existing operations and to come. seek new opportunities to grow and expand our reach for the benefi t The response was overwhelming, with more than 500 individuals of the customers and communities we serve. and cross-functional teams submitting nearly 1,000 ideas. From among As evidenced throughout this report, we are steadfastly committed those, we identifi ed six in particular as having transformative potential. to ‘doing energy better.’ This speaks to our goal to make, move and Their stories are detailed elsewhere in this report, and I am confi dent help customers use energy more effi ciently than anyone else in our that you will be extremely impressed with the depth and breadth of industry. With that mission in mind, we have sharpened our focus thinking represented. on innovation. The complete story of 2014 is perhaps best told through a brief Innovation has been a hallmark of Southern Company since its review of progress on each of our fi ve strategic priorities: inception, and in 2014 we were very intentional in our efforts to leverage the creativity of our workforce. In May, we announced an internal competition to tap into that creative energy and surface fresh ideas. Known as SO Prize, the competition was designed to recognize system employees who devised the most inventive solu- tions to address the various challenges of the electric utility industry, Excel at the Fundamentals Nothing is more fundamental to our business than customer service. Southern Company and its four traditional operating companies occu- pied the top fi ve spots in the most recent Customer Value Benchmark survey, our annual peer comparison of U.S. electric utilities. Those of Southern Company 2014 Summary Annual Report 3 our traditional operating companies that were rated in the J.D. Power ﬂ exibility to serve customers with that generated energy, or sell some and Associates American Customer Satisfaction Survey all ranked or all of it–or the associated renewable energy credits –to third parties. either fi rst or second in their respective categories. Alabama Power In 2014, we continued to grow our wholesale renewable portfolio was also named the Most Trusted Residential Electric Utility in America through our Southern Power subsidiary, which added three new solar by Lifestory Research, an independent research fi rm. facilities in California and New Mexico. Southern Power is also devel- Our transmission and distribution businesses performed superbly, oping a 131-megawatt solar plant in Taylor County, Georgia, and has setting all-time record lows for the frequency and duration of trans- acquired two other solar projects in Georgia that will provide an mission outages, as well as an all-time system record for distribution additional 99 megawatts. Along with the expansion of its solar assets, outage frequency. And these results are just the latest in a 12-year Southern Power has also entered into an agreement to acquire the trend of improved performance. 299-megawatt Kay Wind project in Oklahoma. Achieve Success with Major Construction Projects to own more than 970 megawatts of renewable energy generating Work continues on Georgia Power’s Vogtle units 3 and 4, where our capacity, and is clearly becoming an industry leader in the advance- focus continues to be on safety and quality, with construction of the ment and operation of renewable energy technologies. two nuclear islands as our critical path going forward. Milestones In addition, Gulf Power has fi led for approval to purchase power achieved in 2014 include the placement of the Unit 4 containment from Kingfi sher Wind in Oklahoma, and Georgia Power is evaluating Upon completion of these facilities, Southern Power is expected vessel bottom head, the Unit 3 lower ring and the CA20 critical module, wind turbines on Skidaway Island, Georgia. which houses plant components and the used fuel storage area. Vogtle construction has not been without its challenges. We received Value and Develop Our People a revised forecast from our contractor that reﬂ ects an 18-month delay Fortune magazine recently named Southern Company to its “World’s from previously estimated in-service dates. It is signifi cant to note, Most Admired Companies” list as a top utility worldwide for the sixth however, that the proposed schedule does not change the range of consecutive year, and we were cited as one of the 40 Best Companies the expected customer rate impact. The forecasted effect on customer for Diversity by Black Enterprise magazine. G.I. Jobs magazine ranked rates is still less than originally anticipated, with the overall impact Southern Company fi rst among utilities in its Top 100 Military Friendly projected to be 6 to 8 percent, compared with 12 percent when cer- Employers, the eighth consecutive year we have received the top rank- tifi ed by the Georgia Public Service Commission in 2009. These new ing. In 2014, we completed 481 transfers of employees between our units will fuel a growing Georgia for at least 60 years, resulting in various subsidiaries, broadening their experience and knowledge of signifi cant lifecycle savings. Building them safely–and correctly–is far our industry and business operations. more important than building them quickly. At Mississippi Power’s Integrated Gasifi cation Combined Cycle These and many other accomplishments are the direct result of an project in Kemper County, Mississippi, construction is nearly complete unwavering focus on the core values that have shaped our company’s and we have completed the fi rst fi ring of the facility’s gasifi er burners, identity since its inception. Going forward, we remain anchored in those which functioned as expected. We anticipate our fi rst syngas pro- values. In particular, our customer-focused business model will continue duction in the third quarter of 2015. Operational training and control to be the guiding principle for all that we do. As we turn our attention systems validation, as well as start-up and commissioning activities, to the future, I am confi dent that the opportunities we encounter will are all underway and progressing well. give rise to even greater creativity and innovation throughout our orga- Support the Building of a National Energy Policy Thank you for your continued confi dence in Southern Company. We continue to advocate for a common sense national energy policy Our management and employees remain diligent in their efforts to pro- that embraces the full energy portfolio and places a premium on vide exceptional shareholder value. It is an honor to serve you. nization, even as we remain rooted in this fi rm foundation. energy innovation and the restoration of America’s fi nancial integrity. Our vision for the full energy portfolio includes new nuclear, 21st century Sincerely, coal, natural gas and renewables such as wind and solar, together with an emphasis on energy effi ciency. Promote Energy Innovation We continue to produce and purchase power from a variety of renew- able energy sources. Our traditional operating companies have the Thomas A. Fanning March 26, 2015 Southern Company 2014 Summary Annual Report 4 Financial Highlights 2.57 2.70 2.37 2.19 1.88 2.37 2.57 2.68 2.71 2.80 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Basic Earnings Per Share (In Dollars) Basic Earnings Per Share Excluding Kemper IGCC Impacts, Leveraged Lease Restructure Charge, and MC Asset Recovery Insurance Settlements* (In Dollars) * Not a financial measure under generally accepted accounting principles. See Glossary on page 36 for additional information and specific adjustments made to this measure by year. 17.46 17.66 16.54 17.09 18.47 12.71 13.04 13.10 10.08 8.82 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Operating Revenues (In Billions of Dollars) Return On Average Common Equity (Percent) Operating Revenues (In Millions) Earnings (In Millions) Basic Earnings Per Share Diluted Earnings Per Share Dividends Per Share (Amount Paid) Dividend Yield (Year-End, Percent) Average Shares Outstanding (In Millions) Return On Average Common Equity (Percent) Book Value Per Share Market Price Per Share (Year-End, Closing) Total Market Value of Common Stock (Year-End, In Millions) Total Assets (In Millions) Total Kilowatt-Hour Sales (In Millions) Retail Wholesale Total Traditional Operating Company Customers (Year-End, In Thousands) 2014 2013 Change $18,467 $17,087 $1,963 $1,644 $2.19 $2.18 $1.88 $1.87 $2.0825 $2.0125 4.2 897 10.08 $21.98 $49.11 $44,581 $70,923 194,425 4.9 877 8.82 $21.43 $41.11 $36,468 $64,546 183,401 161,639 156,457 32,786 4,504 26,944 4,467 8.1)% 19.4)% 16.5)% 16.6)% 3.5)% (14.3)% 2.3)% 14.3)% 2.6)% 19.5)% 22.2)% 9.9)% 6.0)% 3.3)% 21.7)% 0.8)% Southern Company 2014 Summary Annual Report 5 MAKING Energy Better By Utilizing ALL Available Resources Including new nuclear, 21st century coal, natural gas, renewables and energy effi ciency (Above) The construction of Vogtle units 3 and 4 is the largest job-producing project in the state of Georgia, employing more than 5,500 people in construction, and is expected to create 800 permanent jobs once the units go on line. Upon completion of the new units, Plant Vogtle is expected to generate more electricity than any other U.S. nuclear facility; (Left) Construction nears completion at the Kemper County, Mississippi, coal gasiﬁ cation facility; (Middle) Plant Franklin, a natural gas facility in Smiths, Alabama; (Right) Cimarron Solar Facility, part of the Southern Company system’s growing renewable energy portfolio Southern Company 2014 Summary Annual Report 6 Just as an astute investor understands the importance of a diver- sifi ed investment portfolio, Southern Company is committed to a diversifi ed portfolio of options for power generation that makes use of a wide range of available fuel sources. This approach allows for ﬂ exibility in choosing the most economical and effi cient means of providing clean, safe, reliable and affordable electricity to cus- tomers throughout the Southeast. As a starting point, we believe nuclear must be a dominant solution in a carbon- constrained world. The Southern Company system is pursuing the newest generation of nuclear technology in the world today, and we are leading the nuclear renaissance with the construction of new units at Plant Vogtle in Georgia. Because coal remains such an abundant domestic resource, we have invested consid- erable time and energy exploring ways to use it in a more environmentally responsible manner. We have developed our own technology for coal gasifi cation, and Mississippi Power is constructing a facility designed to use this traditional natural resource in an innovative way that will signifi cantly reduce emissions. With advances in drilling technology, we are now able to obtain affordable supplies of natural gas that were previously unobtainable. As a result, natural gas represented 40 percent of our fuel mix in 2014, and the Southern Company system has become the third-largest consumer of natural gas in the United States. The Southern Company system is one of the largest owners of solar photovoltaic facilities in the U.S., generating energy that can be used to serve customers or sold by our traditional operating companies to third parties, with or without the associated renewable energy credits. The benefi t of this ﬂ exible, full portfolio strategy was apparent during the winter of 2014, when uncharacteristically cold temperatures across the Southeast and other parts of the nation resulted in an accelerated demand for natural gas, as well as a corresponding increase in the cost to purchase it. In response, we were able to seamlessly turn to other fuel sources for power generation to help keep costs low, even as we addressed increased customer demand. Fuel Flexibility (Percent, GWHs of Energy)* Coal Gas Nuclear Hydro/Other 2000 2014 Low Gas Price High Gas Price 2020 Range** 78 4 16 2 40 40 16 4 21 55 18 6 49 27 18 6 * Includes purchased power. ** Illustrative ranges based on assumed natural gas prices of $2/mmBtu (Low Gas Price) and $14/mmBtu (High Gas Price). Assumptions have been selected to illustrate the Southern Company system’s fuel ﬂ exibility and do not represent actual forecasts of future system fuel mix or natural gas prices. MAKING Energy Better By Advancing Smarter Technologies that Generate Cleaner Energy With new nuclear, 21st century coal and a rapidly growing portfolio of renewables, the Southern Company system leads the way in clean power generation. 0% -20% -40% -60% -80% -100% ’90 ’94 ’98 ’02 ’06 ’10 ’14 Southern Company System Emissions Trends (Percent Change Since 1990 Levels) • SULFUR DIOXIDE • • NITROGEN OXIDES • The Southern Company system continues to develop and utilize the very latest in technological innovations to produce electricity more cleanly and effi ciently. Since 1990, we have reduced major emissions by 80 percent, even as generating capacity increased by as much as 40 percent. At Plant Vogtle, Georgia Power is building the fi rst new nuclear reactors in the United States in 30 years, using the latest in nuclear technology. With virtually no emissions, nuclear power is one of the cleanest forms of generation available. The Southern Company system is leading the way in coal gasifi - cation technology with our Transport Reactor Integrated Gasifi cation process, or TRIG™. This process is currently being implemented at Mississippi Power’s new coal-fi red facility in Kemper County, Missis- sippi, where construction is nearing completion. When the facility is fi nished, Mississippi Power will take an otherwise unused natural resource – native Mississippi lignite – remove much of the CO2 and generate electricity with a carbon footprint comparable to that of a similarly sized natural gas facility. In Wilsonville, Alabama, we operate the National Carbon Capture Center on behalf of the U.S. Department of Energy. The center provides facilities for testing new technologies for ﬂ ue gas and coal-derived syngas, helping to accelerate the development of cost-effective CO2 capture technologies. We continue to produce and purchase thousands of megawatt-hours from renewable projects, with the ﬂ exibility to serve the customers of our traditional operating companies with the generated energy, or sell some or all of the power or the associated renewable energy credits to third parties. Georgia Power has plans to build 30-megawatt solar installations at the Kings Bay Naval Submarine Base near St. Mary’s, Georgia, and at three U.S. Army bases: Fort Stewart, near Savannah; Fort Benning, near Columbus; and Fort Gordon, near Augusta. Gulf Power is partnering with the U.S. Navy and U.S. Air Force to build solar farms at three different military installations in northwest Florida, and Alabama Power, Georgia Power and Gulf Power all have contracts to purchase power from wind facilities in Kansas and Oklahoma. Meanwhile, Southern Power has been cleared to con struct a 900-acre, 131-megawatt solar farm in Taylor County, Georgia and an- nounced the acquisition of an additional 99 megawatts of generating capacity associated with two other Georgia facilities. With the comple- tion of these and other projects, Southern Power is expected to own more than 970 megawatts of renewable energy generating capacity that is either already in operation or under development. Construction nears completion at Mississippi Power’s new integrated gasiﬁ cation combined cycle (IGCC) facility in Kemper County, Mississippi. When completed, this 21st century coal facility will utilize native Mississippi lignite to generate electricity with a carbon footprint comparable to a similarly sized natural gas facility. Southern Company 2014 Summary Annual Report 8 Southern Company 2014 Summary Annual Report 9 SO PRIZE Doing Energy Better By Harnessing the Power of Innovation and Collaboration In May of 2014, we announced an internal competition for system employees that aimed to harness the power of innovation and collabo- ration. The goal was to help the company “look around the corners of the future” and position itself for continued success. More than 500 individuals and teams submitted nearly 1,000 ideas. Many teams were made up of employees from different operating companies and subsidiaries, collaborating across geographic and business unit lines. Known as SO Prize, the competition was designed to recognize employees who devised the most inventive solutions to the various challenges faced by Southern Company and the electric utility industry, and to stimulate fresh ideas that could potentially drive future growth for years to come. In October, six SO Prize winners were announced. The winning teams and individuals, along with a synopsis of their proposals, are highlighted throughout the pages of this publication. Pilot programs have been approved for all six concepts as the company continues to explore and evaluate the possibilities of each. SO PRIZE The Hydrogen Alternative Chethan Acharya and Todd Wall envision a plan for using existing power plants to make hydrogen, which could be transported by liquid carriers to fuel stations using existing oil pipeline infrastructure. The gas could then be used to power proton-exchange membrane fuel cell vehicles on the open road or in industrial settings. Such a scenario could ultimately pave the way for a carbon-free hydrogen economy, with Southern Company positioned as the leading supplier of hydrogen for this market. Team Members: Chethan Acharya (SCS), Todd Wall (SCS) Southern Company 2014 Summary Annual Report 10 SO PRIZE Water, Water Everywhere With 400 miles of coastal access and 27,000 miles of transmission line rights-of-way in the Southern Company system, Ray Smith envisions a grid of pipelines that move water to where it is needed. Desalination plants could be constructed to convert coastal seawater to fresh water and then pump it through pipelines along transmission rights-of-way. Providing the Southeast with a virtually unlimited source of water could help alleviate ongoing discussions between states over the current limited supply, and address local communities’ concerns regarding droughts and water rationing. Team Member: Ray W. Smith (SCS) Southern Company 2014 Summary Annual Report 11 MOVING Energy Better As Proven by Our Industry-Leading Reliability The Southern Company system’s Power Coordination Center, dedicated line crews and innovative technologies combine to ensure excellence in transmission and distribution. 1.4 1.2 1.0 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 SAIFI Performance (In Number of Outages Per Customer) System Average Interruption Frequency Index (SAIFI) is the standard industry index for measuring the number of outages experienced by an average customer in a year. Our 2014 SAIFI was 1.069 events, the best in Southern Company history. Southern Company 2014 Summary Annual Report 12 You might say that Todd Lucas is an expert in keeping the lights on. As gen eral manager of bulk power operations, Todd oversees the Power Coordination Center (PCC), which is responsible for maintaining a reli- able and effi cient transfer of energy throughout the system. PCC staff members work around the clock 365 days a year to monitor activity on the grid, and they oversee the transmission and distribution system at the highest level. that might disrupt sophisticated electronic systems or industrial op- erations. And, of course, having a consistent and reliable source of energy is no less important to residential customers and their families. Thanks to the efforts of these and many other system associates, 2014 saw yet another all-time record established for reliability on our transmission and distribution system, continuing a long-term positive trend of more than a decade. Throughout the Southeast, the diligent efforts of our traditional operating companies’ line crews cannot be over-emphasized. In 2014, crews worked tirelessly to restore power to customers after outages caused by tornadoes and winter storms. On the technology front, we’ve been busy testing innovative power ﬂ ow control technologies that improve the utilization of existing grid infrastructure at signifi cant savings compared with traditional trans- mission line upgrades. These dedicated men and women know that reliability is of critical importance to customers. Businesses require a high level of power quality in order to prevent incremental ﬂ uctuations in the ﬂ ow of energy Ultimately, the combined impact of these individuals and deployed technologies converge to help maintain the industry-leading reliability that customers demand. Todd Lucas (center), general manager of bulk power operations, consults with team members at the Southern Company system’s state-of-the-art Power Coordination Center in Alabama. Southern Company 2014 Summary Annual Report 13 MOVING Energy Better Putting Customers First Makes For Sweet Satisfaction Southern Company’s customer-focused business model is the linchpin of our success. Andra Hall is laser-focused on keeping her customers satisfi ed. Of course, with friendly service and succulent confections like ‘The Elvis’ cupcake, it’s hard to envision how patrons of CamiCakes Cupcakes could ever be anything less than satisfi ed. Named for Andra’s daughter Camille (nick- named “Cami”), CamiCakes offers dedicated fans throughout metro Atlanta a unique selection of baked delights. Likewise, Georgia Power sales and effi ciency representatives work hard to keep customers satisfi ed in their role as company liaisons with businesses like Andra’s. They consult with local businesses to provide an analysis of their energy consumption, and make recommendations for more energy-effi cient operations and potential dollar savings. For example, Andra’s represen- tative suggested that she operate the ovens in her production facility during off-peak hours for signifi cant reductions in cost and usage. Elsewhere, Georgia Power’s new state-of-the-art Customer Resource Center (CRC) enhances customer satisfaction by catering to residential, commercial and industrial customers in a variety of innovative ways. The CRC offers information and demonstrations on electric transpor- tation, comfort systems and cooking technologies, as well as manufacturing applications for industry and energy effi cient ideas for the home, all under one roof. CamiCakes Cupcakes owner Andra Hall and her employees adjust a display of delicious treats prior to the morning opening of one of her Atlanta stores. Georgia Power consults with Ms. Hall to help achieve optimal efﬁ ciency in energy consumption in her retail locations and production center. Southern Company 2014 Summary Annual Report 15 SO PRIZE Line Inspections Using UAVs Today, aerial inspections of power lines are performed with manned aircraft. Paul Schneider and his team propose ﬂ ight-based data collections by unmanned aerial vehicles (UAVs). UAVs are more cost-effective than helicopters and winged aircraft, and they enable closer inspection with less environmental impact. UAVs could also dramatically reduce the time between data collection ﬂ ights that require air support. This proposal estimates that outages could be shortened by an average of 1.5 hours per outage through the use of UAVs –eliminating almost 11 days of outages every year. Team Members: Paul Schneider (GPC; pictured), Matt Clarkson (APC), Dexter Lewis (SCS), Drew McGuire (SCS), Patrick Norris (SCS), Ranato Salvaleon (GPC) Southern Company 2014 Summary Annual Report 16 SO PRIZE Dynamic Data Alabama Power’s James Young and his colleagues are convinced that the key to increasing customer satisfaction, loyalty and revenue lies in better understanding what individual customers want and treating them accordingly. The idea: Use data to identify customer priorities and proactively provide individualized solutions. Data analytics could provide actionable insights that enable the delivery of the right message to the right customer at the right time – or assist in the development of new product and service offerings while identifying the most cost-effective manner in which to implement them. Team Members: James Young (APC; pictured), Noel Black (SCS), Chris Blake (APC), Stoney Burke (SCS), Hannah Flint (SCS), Joe Massari (SCS), Todd Perkins (APC), Tom Schmaeling (APC), Nick Sellers (APC), John Smola (APC), George Stegall (APC), Jeanne Wolak (SCS) Southern Company 2014 Summary Annual Report 17 Southern Company 2014 Summary Annual Report 18 USING Energy Better By Delivering Reliable Service at Affordable Rates, We’re Providing Customers with Peace of Mind Industry-leading reliability, energy-effi cient homes and rates below the national average prove to be a winning combination. Atlanta homeowner Larry Cummings and his wife, Cia, appreciate Georgia Power’s reliable service and affordable rates. And as the own- ers of an almost totally rebuilt home, they also appreciate the energy- effi cient features that their builder included on the advice of Georgia Power’s energy consultants. “We have great confi dence in the reliability of the service we get from Georgia Power,” says Larry. “We don’t really have to think about it. That’s not always the case with other utility providers. And when we fi rst moved into our new home, we were able to establish service with just a single point of contact. For our family, that’s really more important than the savings.” Southern Company’s traditional operating companies work dili- gently to maintain transmission and distribution reliability, and to minimize service down time. But when the occasional planned or weather-related power outage occurs, customers are kept apprised of the latest outage status by a variety of means, including mobile apps, outage alerts, interactive outage maps and social media. Of course, lower power bills don’t hurt, either. According to Larry, “Affordable rates are important because our three children can consume a lot of energy. But because we’ve enjoyed consistently predictable rates, we’ve been able to budget in such a way as to direct household cash ﬂ ow to other family priorities.” Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 19 USING Energy Better Through Smarter Choices Simple, common-sense choices can result in signifi cant savings. Since 2000, energy-effi ciency programs have helped the Southern Company system reduce peak demand by 4,382 megawatts and avoid over 2.6 billion kilowatt-hours of energy use. That’s enough electricity to power the cities of Birmingham, Alabama, Montgom- ery, Alabama and Savannah, Georgia for a year. Pensacola, Florida, homebuilder Kevin Russell understands the value of energy effi ciency in home construction, both for his own home and the homes he builds for his customers. When building a home, Kevin works hand-in-glove with his Gulf Power residential energy consultant, Heather Madison, even before construction begins. Heather meets with Kevin and his team to consult on HVAC, insulation and other aspects of the home- building process, and she continues to visit the job site to assess the energy fi tness of the home as construction progresses. She also counsels Kevin on options for the most effi cient lighting fi xtures, heat pumps, water heaters and other appliances that will work within his customers’ budgets. In his own home, Kevin uses energy-effi cient lighting fi xtures and appliances. Kevin appreciates the fact that energy effi ciency helps keep his monthly power bill low. As part of Gulf Power’s EarthCents program, Gulf Power residential energy consultants also work directly with homeowners like Kevin to help them assess and better control energy usage in their homes. Residential energy consultants in Southern Company’s traditional operat- ing companies are available to perform energy audits, conduct new home inspections and discuss incentive programs. At the end of the day, our goal is to help customers like Kevin use energy better by making smarter and more energy-effi cient choices both in new home construction and in existing homes. (Above) Homeowner–and homebuilder–Kevin Russell installs an energy-efﬁ cient light-emitting diode (LED) light bulb; (Left) An electric charger for plug-in electrical vehicles (PEVs); some 10,000 PEVs are registered in the Southern Company service territory; (Middle) An energy-efﬁ cient programmable thermostat can help lower energy costs; (Right) An ENERGY STAR-rated clothes washer uses about 20 percent less energy than regular washers. Southern Company 2014 Summary Annual Report 21 SO PRIZE Empowering Customers with More Choices Gulf Power’s Lisa Roddy believes customers should have more options, similar to the customized cell phone plans offered by wireless carriers. For example, customers might pay a set amount for unlimited usage or pay only for what they use. They could potentially purchase charging stations for electric vehicles or surge protection at a ﬁ xed price. Lisa envisions that customers might even be able to purchase blocks of renewable energy or select options to ﬁ nance solar power for their homes. Team Member: Lisa Roddy (Gulf) Southern Company 2014 Summary Annual Report 22 SO PRIZE Fueling the PEV Revolution Bryan Coley, John Socha and their team envision a comprehensive effort to accelerate the adoption of plug-in electric vehicles (PEVs). The team proposes the creation of a pre-sale education and awareness program, PEV sales and leasing facilitation, post-sale customer service and a network of charging stations throughout the Southeast. This vision includes the establishment of strategic concierge locations for hands-on driving experiences and the opportunity to purchase PEVs through a network of dealer partners. Team Members: Bryan Coley (Gulf; pictured), John Socha (SCS; pictured), Blair Farley (SCS), Trey Hayes (APC), John Peters (GPC), Jamie Sandford (APC), Lincoln Wood (SCS) Southern Company 2014 Summary Annual Report 23 DOING Energy Better Delivers Long-Term Shareholder Value Customer-Focused Strategy Underpins Consistent Financial Performance Throughout the 103-year history of Southern Company, customers have remained at the center of all we do. We believe our focus on customers translates to value creation for investors, and this is borne out in the results we have delivered over time. Over the long term, Southern Company has proved to be an out- standing investment, outperforming the S&P 500 over the 10-, 20- and 30-year periods ending December 31, 2014. Our dividend– an import- ant part of that performance–increased for the 13th consecutive year in 2014, and we have paid shareholder dividends every quarter since 1948. That’s 269 consecutive quarters. At year-end, Southern Company’s dividend yield was 4.2 percent, compared with approximately 1.9 percent for the S&P 500. Over the past 20 years, dividends and dividend reinvestment have accounted for approximately 69 percent of the increase in our shareholder value, compared with approximately 37 percent of the increase in shareholder value for the S&P 500. As we’ve shared in years past, dividends do more than simply pro- vide cash to shareholders; they help shape a company’s approach to risk. Once again, the proof is in the numbers. In 2014, Southern Company was the least volatile stock in the Philadelphia Electric Utility Index. Stocks with low volatility tend to be less prone to price swings during times of market stress, and are therefore considered more stable. Keeping customers fi rst–along with industry-leading reliability and prices below the national average– has enabled us to sustain opera- tional success, reinforcing our reputation for providing exceptional shareholder value. • SOUTHERN COMPANY • • S&P 500 INDEX • • PHILADELPHIA ELECTRIC UTILITY INDEX • $10,855 $6,547 $6,446 $10,000 $8,000 $6,000 $4,000 $2,000 $0 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 Value of $1,000 Invested Over 20 Years This performance graph compares the cumulative return on Southern Company (SO) common stock with the Philadelphia Electric Utility Index and the Standard & Poor’s (S&P) 500 Index for the past 20 years. The average annualized return during the 20-year period is 12.7 percent for Southern Company, compared to 9.8 percent for the UTY and 9.8 percent for the S&P 500. The graph assumes that $1,000 was invested in Southern Company common stock and each of the above indices on December 31, 1994, and that all dividends were reinvested. A ﬁ ve-year performance graph is included in Appendix D to the Proxy Statement. See Glossary on page 36 for information on total shareholder return. Source: FactSet and Bloomberg Southern Company 2014 Summary Annual Report 24 SOUTHERN COMPANY 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Value Added by Low Volatility Relative to the Market This chart shows the volatility of each of the 20 utilities in the Philadelphia Electric Utility Index (UTY). Volatility refers to the tendency of a stock to react to swings in the market. Southern Company had the lowest level of volatility in the UTY Index and one of lowest in the S&P 500. See Glossary on page 36 for information on beta. Source: FactSet and Bloomberg, ﬁ ve-year beta as of December 31, 2014 • SOUTHERN COMPANY DIVIDEND VALUE • • SOUTHERN COMPANY STOCK VALUE • $10,000 $8,000 $6,000 $4,000 $2,000 $0 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 Value Created by Dividend and Price Performance This chart shows the power of Southern Company’s dividend. Over the last 20 years, a $1,000 investment in SO grew to $10,855. Increases in the value of SO stock contributed $3,047 and dividends, with reinvestment, accounted for an increase of $6,808, or approximately 69 percent of the gain in value. The graph assumes that $1,000 was invested in Southern Company common stock on December 31, 1994, and that all dividends were reinvested. See Glossary on page 36 for information on total shareholder return. Source: Bloomberg Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 25 TOTAL SO VALUE SO DIVIDENDS AND REINVESTMENT SO STOCK VALUE Cautionary Statement Regarding Forward-Looking Statements Southern Company’s 2014 Summary Annual Report contains forward-looking statements. Forward-looking statements include, among other things, state- ments concerning future sources of generation, completion of acquisitions and construction projects and the anticipated benefi ts thereof, expected retail rates and the potential benefi ts of possible innovations. In some cases, forward- looking statements can be identifi ed by terminology such as “may,” “will,” “could,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include: • the impact of recent and future federal and state regulatory changes, includ- ing legislative and regulatory initiatives regarding deregulation and restruc- turing of the electric utility industry, environmental laws including regulation of water, coal combustion residuals, and emissions of sulfur, nitrogen, CO2, soot, particulate matter, hazardous air pollutants, including mercury, and other substances, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations; • current and future litigation, regulatory investigations, proceedings, or inquiries, including pending Environmental Protection Agency civil actions against certain Southern Company subsidiaries, Federal Enegy Regulatory Commission matters, and Internal Revenue Service and state tax audits; • legal proceedings and regulatory approvals and actions related to Plant Vogtle units 3 and 4, including Georgia Public Service Commission approvals and NRC actions and related legal proceedings involving the commercial parties; • actions related to cost recovery for the Kemper IGCC project, including actions relating to proposed securitization, Mississippi Public Service Commission approval of a rate recovery plan, including the ability to com- plete the proposed sale of an interest in the Kemper IGCC project to South Mississippi Electric Power Association, the ability to utilize bonus deprecia- tion, which currently requires that assets be placed in service in 2015, and satisfaction of requirements to utilize ITCs and grants; • Mississippi Public Service Commission review of the prudence of Kemper IGCC project costs; • the ultimate outcome and impact of the February 2015 decision of the Mississippi Supreme Court and any further legal or regulatory proceedings regarding any settlement agreement between MPC and the Mississippi Public Service Commission, the March 2013 rate order regarding retail rate increases, or the Baseload Act; • the ability to successfully operate the electric utilities’ generating, transmis- sion, and distribution facilities and the successful performance of necessary corporate functions; • the inherent risks involved in operating and constructing nuclear generating facilities, including environmental, health, regulatory, natural disaster, terror- ism, or fi nancial risks; • the performance of projects undertaken by the non-utility businesses and the • the effects, extent, and timing of the entry of additional competition in the success of efforts to invest in and develop new opportunities; markets in which Southern Company’s subsidiaries operate; • variations in demand for electricity, including those relating to weather, the general economy and recovery from the last recession, population and busi- ness growth (and declines), the effects of energy conservation and effi ciency measures, including from the development and deployment of alternative en- ergy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fi scal decisions; • available sources and costs of fuels; • effects of inﬂ ation; • the ability to control costs and avoid cost overruns during the development and construction of facilities, which include the development and construc- tion of generating facilities with designs that have not been fi nalized or previously constructed, including changes in labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equip- ment, materials, and labor, contractor or supplier delay, non-performance under construction or other agreements, operational readiness, including specialized operator training and required site safety programs, unfore- seen engineering or design problems, start-up activities (including major equipment failure and system integration), and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by any Public Service Commission); • the ability to construct facilities in accordance with the requirements of per- mits and licenses, to satisfy any operational and environmental performance standards, including any Public Service Commission requirements and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction; • investment performance of Southern Company’s employee and retiree ben- efi t plans and the Southern Company system’s nuclear decommissioning trust funds; • advances in technology; • state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms; • internal restructuring or other restructuring options that may be pursued; • potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or benefi cial to Southern Company or its subsidiaries; • the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required; • the ability to obtain new short- and long-term contracts with wholesale customers; • the direct or indirect effect on the Southern Company system’s business resulting from cyber intrusion or terrorist incidents and the threat of terrorist incidents; • interest rate ﬂ uctuations and fi nancial market conditions and the results of fi nancing efforts; • changes in Southern Company’s or any of its subsidiaries’ credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements; • the impacts of any sovereign fi nancial issues, including impacts on inter- est rates, access to capital markets, impacts on currency exchange rates, counterparty performance, and the economy in general, as well as potential impacts on the benefi ts of the Department of Energy loan guarantees; • the ability of Southern Company’s subsidiaries to obtain additional generating capacity at competitive prices; • catastrophic events such as fi res, earthquakes, explosions, ﬂ oods, hurricanes and other storms, droughts, pandemic health events such as inﬂ uenzas, or other similar occurrences; • the direct or indirect effects on the Southern Company system’s business resulting from incidents affecting the U.S. electric grid or operation of gen- erating resources; • the effect of accounting pronouncements issued periodically by standard- setting bodies; and • other factors discussed elsewhere herein and in other reports, including Southern Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (Form 10-K), fi led by Southern Company from time to time with the Securities and Exchange Commission. Southern Company expressly disclaims any obligation to update any forward-looking information. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 26 Financial Information The following condensed fi nancial presentation should not be consid- ered a substitute for the full fi nancial statements, inclusive of footnotes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, provided to all shareholders in Appendix D to the Company’s 2015 Proxy Statement and included in the Form 10-K as fi led with the Securities and Exchange Commission. Appendix D to the Proxy Statement and the Form 10-K also contain detailed discus- sions of major uncertainties, contingencies, risks, and other issues the Company faces. A copy of the Form 10-K and/or the Proxy Statement, when available, including the full fi nancial statements, can be obtained by calling Shareowner Services at 1-800-554-7626 or by accessing it online at http://investor.southerncompany.com. Management’s Report On Internal Control Over Financial Reporting The management of The Southern Company is responsible for establish- ing and maintaining an adequate system of internal control over fi nancial reporting as required by the Sarbanes-Oxley Act of 2002 and as defi ned in Exchange Act Rule 13a-15(f). A control system can provide only reason- able, not absolute, assurance that the objectives of the control system are met. Under management’s supervision, an evaluation of the design and effectiveness of Southern Company’s internal control over fi nancial re- porting was conducted based on the framework in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Southern Company’s internal control over fi nancial reporting was effective as of December 31, 2014. Deloitte & Touche LLP, an independent registered public accounting fi rm, as auditors of Southern Company’s fi nancial statements, has issued an attestation report on the effectiveness of Southern Company’s inter- nal control over fi nancial reporting as of December 31, 2014. Deloitte & Touche LLP’s report on Southern Company’s internal control over fi nan- cial reporting appears in Appendix D to the Proxy Statement and in the Form 10-K as fi led with the Securities and Exchange Commission. Thomas A. Fanning Chairman, President and Chief Executive Offi cer Art P. Beattie Executive Vice President and Chief Financial Offi cer March 2, 2015 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Southern Company We have audited the consolidated balance sheets and consolidated state- ments of capitalization of Southern Company and Subsidiary Companies (the Company) as of December 31, 2014 and 2013, and the related con- solidated statements of income, comprehensive income, stockholders’ equity, and cash ﬂ ows for each of the three years in the period ended December 31, 2014. We have also audited the effectiveness of the Com- pany’s internal control over fi nancial reporting as of December 31, 2014. Such consolidated fi nancial statements, management’s assessment of the effectiveness of the Company’s internal control over fi nancial report- ing, and our report on the consolidated fi nancial statements and internal control over fi nancial reporting dated March 2, 2015, expressing an un- qualifi ed opinion (which is not included herein) are included in Appendix D to the proxy statement for the 2015 annual meeting of stockholders. The accompanying condensed consolidated fi nancial statements are the responsibility of the Company’s management. Our responsibility is to ex- press an opinion on such condensed consolidated fi nancial statements in relation to the complete consolidated fi nancial statements. In our opinion, the information set forth in the accompanying con- densed consolidated balance sheets as of December 31, 2014 and 2013, and the related condensed consolidated statements of income and of cash ﬂ ows for each of the three years in the period ended December 31, 2014, is fairly stated in all material respects in relation to the consolidat- ed fi nancial statements from which it has been derived. Atlanta, Georgia March 2, 2015 Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 27 Condensed Consolidated Statements of Income For the Years Ended December 31, 2014, 2013, and 2012 (In Millions) Operating Revenues: Retail revenues Wholesale revenues Other electric revenues Other revenues Total operating revenues Operating Expenses: Fuel Purchased power Other operations and maintenance Depreciation and amortization Taxes other than income taxes Estimated loss on Kemper IGCC Total operating expenses Operating Income Other Income and (Expense): Allowance for equity funds used during construction Interest income Interest expense, net of amounts capitalized Other income (expense), net Total other income and (expense) Earnings Before Income Taxes Income taxes Consolidated Net Income Dividends on Preferred and Preference Stock of Subsidiaries Consolidated Net Income After Dividends on Preferred and Preference Stock of Subsidiaries Common Stock Data: Earnings per share (EPS)— Earnings per share (EPS)— Basic EPS Diluted EPS Average number of shares of common stock outstanding—(in millions) Average number of shares of common stock outstanding—(in millions) Basic Diluted 2014 2013 2013 2013 2012 2012 2012 $15,550 2,184 672 61 18,467 6,005 672 4,354 1,945 981 868 14,825 3,642 245 19 (835) (63) (634) 3,008 977 2,031 68 $14,541 $14,541 $14,541 1,855 1,855 1,855 639 639 639 52 52 52 17,087 17,087 17,087 5,510 5,510 5,510 461 461 461 3,846 3,846 3,846 1,901 1,901 1,901 934 934 934 1,180 1,180 1,180 13,832 13,832 13,832 3,255 3,255 3,255 190 190 190 19 19 19 (824) (824) (824) (81) (81) (81) (696) (696) (696) 2,559 2,559 2,559 849 849 849 1,710 1,710 1,710 66 66 66 $14,187 $14,187 $14,187 1,675 1,675 1,675 616 616 616 59 59 59 16,537 16,537 16,537 5,057 5,057 5,057 544 544 544 3,772 3,772 3,772 1,787 1,787 1,787 914 914 914 — — — 12,074 12,074 12,074 4,463 4,463 4,463 143 143 143 40 40 40 (859) (859) (859) (38) (38) (38) (714) (714) (714) 3,749 3,749 3,749 1,334 1,334 1,334 2,415 2,415 2,415 65 65 65 $ 1,963 $ 1,644 $ 1,644 $ 1,644 $ 2,350 $ 2,350 $ 2,350 $ 2.19 2.18 897 901 $ 1.88 $ 1.88 $ 1.88 1.87 1.87 1.87 877 877 877 881 881 881 $ 2.70 $ 2.70 $ 2.70 2.67 2.67 2.67 871 871 871 879 879 879 Full disclosure of all fi nancial information is included in Appendix D to the Proxy Statement and in the Form 10-K as fi led with the Securities and Exchange Commission, including the accompanying footnotes, which are an integral part of the fi nancial statements. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 28 Condensed Consolidated Statements of Cash Flows For the Years Ended December 31, 2014, 2013, and 2012 (In Millions) 2014 2013 2013 2013 2012 2012 2012 Operating Activities: Consolidated net income Adjustments to reconcile consolidated net income to net cash provided from operating activities— from operating activities— Depreciation and amortization, total Deferred income taxes Investment tax credits Allowance for equity funds used during construction Pension, postretirement, and other employee benefi ts Stock based compensation expense Estimated loss on Kemper IGCC Other, net Changes in certain current assets and liabilities— Changes in certain current assets and liabilities— Receivables Fossil fuel stock Materials and supplies Other current assets Accounts payable Accrued taxes Accrued compensation Mirror CWIP Other current liabilities Net cash provided from operating activities Investing Activities: Property additions Investment in restricted cash Distribution of restricted cash Nuclear decommissioning trust fund purchases Nuclear decommissioning trust fund sales Cost of removal, net of salvage Change in construction payables, net Prepaid long-term service agreement Other investing activities Net cash used for investing activities Financing Activities: Increase (decrease) in notes payable, net Proceeds— Proceeds— Long-term debt issuances Interest-bearing refundable deposit Preference stock Common stock issuances Redemptions and repurchases— Redemptions and repurchases— Long-term debt Common stock repurchased Payment of common stock dividends Payment of dividends on preferred and preference stock of subsidiaries Other fi nancing activities Net cash provided from (used for) fi nancing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 2,031 $ 1,710 $ 1,710 $ 1,710 $ 2,415 $ 2,415 $ 2,415 2,293 709 35 (245) (515) 63 868 (38) (352) 408 (67) (57) 267 (105) 255 180 85 5,815 (5,977) (11) 57 (916) 914 (170) (107) (181) (17) (6,408) (676) 3,169 125 — 806 (816) (5) (1,866) (68) (25) 644 51 659 $ 710 2,298 2,298 2,298 496 496 496 302 302 302 (190) (190) (190) 131 131 131 59 59 59 1,180 1,180 1,180 (41) (41) (41) (153) (153) (153) 481 481 481 36 36 36 (11) (11) (11) 72 72 72 (85) (85) (85) (138) (138) (138) — — — (50) (50) (50) 6,097 6,097 6,097 (5,463) (5,463) (5,463) (149) (149) (149) 96 96 96 (986) (986) (986) 984 984 984 (131) (131) (131) (126) (126) (126) (91) (91) (91) 124 124 124 (5,742) (5,742) (5,742) 662 662 662 2,938 2,938 2,938 — — — 50 50 50 695 695 695 (2,830) (2,830) (2,830) (20) (20) (20) (1,762) (1,762) (1,762) (66) (66) (66) 9 9 9 (324) (324) (324) 31 31 31 628 628 628 $ 659 $ 659 $ 659 2,145 2,145 2,145 1,096 1,096 1,096 128 128 128 (143) (143) (143) (398) (398) (398) 55 55 55 — — — 51 51 51 234 234 234 (452) (452) (452) (97) (97) (97) (37) (37) (37) (89) (89) (89) (71) (71) (71) (28) (28) (28) — — — 89 89 89 4,898 4,898 4,898 (4,809) (4,809) (4,809) (280) (280) (280) 284 284 284 (1,046) (1,046) (1,046) 1,043 1,043 1,043 (149) (149) (149) (84) (84) (84) (146) (146) (146) 19 19 19 (5,168) (5,168) (5,168) (30) (30) (30) 4,404 4,404 4,404 150 150 150 — — — 397 397 397 (3,169) (3,169) (3,169) (430) (430) (430) (1,693) (1,693) (1,693) (65) (65) (65) 19 19 19 (417) (417) (417) (687) (687) (687) 1,315 1,315 1,315 $ 628 $ 628 $ 628 Full disclosure of all fi nancial information is included in Appendix D to the Proxy Statement and in the Form 10-K as fi led with the Securities and Exchange Commission, including the accompanying footnotes, which are an integral part of the fi nancial statements. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 29 Condensed Consolidated Balance Sheets At December 31, 2014 and 2013 Assets (In Millions) Current Assets: Cash and cash equivalents Receivables— Receivables— Customer accounts receivable Unbilled revenues Under recovered regulatory clause revenues Other accounts and notes receivable Accumulated provision for uncollectible accounts Fossil fuel stock, at average cost Materials and supplies, at average cost Vacation pay Prepaid expenses Deferred income taxes, current Other regulatory assets, current Other current assets Total current assets Property, Plant, and Equipment: In service Less accumulated depreciation Plant in service, net of depreciation Other utility plant, net Nuclear fuel, at amortized cost Construction work in progress Total property, plant, and equipment Other Property and Investments: Nuclear decommissioning trusts, at fair value Leveraged leases Miscellaneous property and investments Total other property and investments Deferred Charges and Other Assets: Deferred charges related to income taxes Prepaid pension costs Unamortized debt issuance expense Unamortized loss on reacquired debt Other regulatory assets, deferred Other deferred charges and assets Total deferred charges and other assets Total Assets 2014 2013 2013 $ 710 $ 659 1,090 432 136 307 (18) 930 1,039 177 665 506 346 50 6,370 70,013 24,059 45,954 211 911 7,792 54,868 1,546 743 203 2,492 1,510 — 202 243 4,334 904 7,193 $70,923 1,027 1,027 448 448 58 58 304 304 (18) (18) 1,339 1,339 959 959 171 171 278 278 143 143 207 207 39 39 5,614 5,614 66,021 66,021 23,059 23,059 42,962 42,962 240 240 855 855 7,151 7,151 51,208 51,208 1,465 1,465 665 665 218 218 2,348 2,348 1,436 1,436 419 419 139 139 269 269 2,495 2,495 618 618 5,376 5,376 $64,546 Full disclosure of all fi nancial information is included in Appendix D to the Proxy Statement and in the Form 10-K as fi led with the Securities and Exchange Commission, including the accompanying footnotes, which are an integral part of the fi nancial statements. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 30 Condensed Consolidated Balance Sheets At December 31, 2014 and 2013 Liabilities and Stockholders’ Equity (In Millions) 2014 2013 2013 Current Liabilities: Securities due within one year Interest-bearing refundable deposit Notes payable Accounts payable Customer deposits Accrued taxes — Accrued income taxes Other accrued taxes Accrued interest Accrued vacation pay Accrued compensation Other regulatory liabilities, current Mirror CWIP Other current liabilities Total current liabilities Long-Term Debt Deferred Credits and Other Liabilities: Accumulated deferred income taxes Deferred credits related to income taxes Accumulated deferred investment tax credits Employee benefi t obligations Asset retirement obligations Other cost of removal obligations Other regulatory liabilities, deferred Other deferred credits and liabilities Total deferred credits and other liabilities Total Liabilities Redeemable Preferred Stock of Subsidiaries Redeemable Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity $ 3,333 275 803 1,593 390 151 487 295 223 576 26 271 544 8,967 20,841 11,568 192 1,208 2,432 2,168 1,215 398 594 19,775 49,583 375 39 20,926 $70,923 $ 469 $ 469 150 150 1,482 1,482 1,376 1,376 380 380 13 13 456 456 251 251 217 217 303 303 82 82 — — 346 346 5,525 5,525 21,344 21,344 10,563 10,563 203 203 966 966 1,461 1,461 2,006 2,006 1,275 1,275 479 479 585 585 17,538 17,538 44,407 44,407 375 375 — — 19,764 19,764 $64,546 $64,546 Full disclosure of all fi nancial information is included in Appendix D to the Proxy Statement and in the Form 10-K as fi led with the Securities and Exchange Commission, including the accompanying footnotes, which are an integral part of the fi nancial statements. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 31 Board of Directors 4. Thomas A. Fanning Chairman, President and CEO Southern Company Atlanta, GA | Age 58 | elected 2010 Other directorships: Federal Reserve Bank of Atlanta, Vulcan Materials Company 5. David J. Grain Founder and Managing Partner Grain Management, LLC (private equity firm) Sarasota, FL | Age 52 | elected 2012 Board committees: Compensation and Management Succession, Finance Other directorship: Gateway Bank of Southwest Florida 6. Veronica M. Hagen Lead Independent Director Southern Company Board (effective May 2014) Retired President and CEO Polymer Group, Inc. (engineered materials) Charlotte, NC | Age 69 | elected 2008 Board committees: Compensation and Management Succession, Nuclear/Operations Other directorships: Polymer Group, Inc., Newmont Mining Corporation 7. Warren A. Hood, Jr. Chairman and CEO Hood Companies, Inc. (packaging and construction products) Hattiesburg, MS | Age 63 | elected 2007 Board committee: Audit Other directorships: Hood Companies, Inc., BancorpSouth, Inc. 1. Juanita Powell Baranco Executive Vice President and Chief Operating Officer Baranco Automotive Group (automobile sales) Atlanta, GA | Age 66 | elected 2006 Board committee: Audit Other directorships: None 2. Jon A. Boscia Founder and President Boardroom Advisors LLC (board governance consulting firm) Sarasota, FL | Age 62 | elected 2007 Board committee: Audit (chair) Other directorships: None 3. Henry A. Clark III Senior Advisor Evercore Partners Inc. (corporate finance advisory firm) New York, NY | Age 65 | elected 2009 Board committees: Compensation and Management Succession (chair), Finance Other directorships: None 2. 3. 1. 4. 5. 6. 7. 8. Linda P. Hudson 11. Dale E. Klein 13. Steven R. Specker Founder, Chairman and CEO The Cardea Group (business management consulting) Charlotte, NC | Age 64 | elected 2014 Board committees: Governance, Nuclear/ Operations, Business Security Subcommittee Other directorships: BAE Systems, Inc., Bank of America Corporation 9. Donald M. James Chairman and Retired CEO Vulcan Materials Company (construction materials) Birmingham, AL | Age 66 | elected 1999 Board committees: Governance (chair), Finance Other directorships: Vulcan Materials Company, Wells Fargo & Company 10. John D. Johns Chairman, President and CEO Protective Life Corporation (insurance) Birmingham, AL | Age 63 | elected 2015 Board committee: Audit Other directorships: Protective Life Corporation, Regions Financial Corporation, Genuine Parts Company Associate Vice Chancellor of Research University of Texas System Associate Director The Energy Institute at the University of Texas at Austin Retired Chairman U.S. Nuclear Regulatory Commission (energy) Austin, TX | Age 67 | elected 2010 Board committees: Governance, Nuclear/Operations, Business Security Subcommittee (chair) Other directorships: Pinnacle West Capital Corporation, Arizona Public Service Company 12. William G. Smith, Jr. Chairman, President and CEO Capital City Bank Group, Inc. (banking) Tallahassee, FL | Age 61 | elected 2006 Board committees: Compensation and Management Succession, Finance (chair) Other directorships: Capital City Bank Group, Inc., Capital City Bank Retired President and CEO Electric Power Research Institute (energy) Scottsdale, AZ | Age 69 | elected 2010 Board committees: Nuclear/Operations (chair), Compensation and Management Succession Other directorship: Trilliant, Inc. 14. Larry D. Thompson Retired Executive Vice President PepsiCo, Inc. (food and beverage products) Atlanta, GA | Age 69 | elected 2014 Board committee: Audit Other directorships: Graham Holdings Company, Franklin, Templeton Series Mutual Funds 15. E. Jenner Wood III Chairman and CEO SunTrust Bank – Atlanta Division (banking) Atlanta, GA | Age 63 | elected 2012 Board committees: Governance, Nuclear/Operations Other directorships: Oxford Industries, Inc., Genuine Parts Company 9. 10. 11. 12. 13. 14. 15. 8. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 33 Management Council 1. Art P. Beattie 3. Stan W. Connally, Jr. Executive Vice President and Chief Financial Officer President and CEO, Gulf Power 5. Thomas A. Fanning Chairman, President and CEO Beattie, 60, joined the company in 1976 as a junior accountant with Alabama Power. He has held his current position since August 2010. Beattie is responsible for the company’s accounting, ﬁ nance, tax, investor relations, treasury and risk management functions. He also serves as chief risk officer. Previously, Beattie served in several executive accounting and ﬁ nance positions at Alabama Power, including chief financial officer, treasurer and comptroller. 2. W. Paul Bowers Executive Vice President Chairman, President and CEO, Georgia Power Bowers, 58, joined the company as a residential sales representative with Gulf Power in 1979. He has held his current position since January 2011. Previously, Bowers served as chief ﬁ nancial ofﬁ cer for Southern Company. He also served as president of Southern Company Generation, president and CEO of Southern Power, president and CEO of Southern Company’s former United Kingdom subsidiary and senior vice president and chief marketing officer for Southern Company. Connally, 45, joined the company in 1989 as a co-op student at Georgia Power. He has held his current position since July 2012. Previously, he served as senior vice president and senior production ofﬁ cer for Georgia Power. He has served as plant manager at plants Watson, Daniel and Barry. He has also worked in customer operations and sales and marketing. Fanning, 58, joined the company as a ﬁ nancial analyst in 1980. He has held his current position since December 2010. Previously, Fanning served as executive vice president and chief operating ofﬁ cer for Southern Company, president and CEO of Gulf Power and chief ﬁ nancial ofﬁ cer for Southern Company, Georgia Power and Mississippi Power. 4. Mark A. Crosswhite 6. Kimberly S. Greene Executive Vice President Chairman, President and CEO, Alabama Power Executive Vice President and Chief Operating Officer Crosswhite, 52, joined the company in 2004 as senior vice president and general counsel for Southern Company Generation. He has held his current position since March 2014. He was previously executive vice president and chief operating officer for Southern Company, president and CEO of Gulf Power and executive vice president of external affairs and senior vice president and general counsel at Alabama Power. Prior to joining the company, he was a partner in the law firm of Balch & Bingham LLP in Birmingham, Alabama, where he practiced for 17 years. Greene, 48, has held her current role since March 2014. Previously, she was president and CEO of Southern Company Services. Prior to that, she was employed by TVA, where she served as chief ﬁ nancial ofﬁ cer, group president of strategy and external relations and chief generation ofﬁ cer. Prior to her time at TVA, she served as senior vice president of ﬁ nance and treasurer for Southern Company and has held various positions with Mirant, including chief commercial ofﬁ cer, South Region. 1. 2. 3. 4. 5. 6. 7. G. Edison Holland, Jr. Executive Vice President Chairman, President and CEO, Mississippi Power Holland, 62, joined the company as vice president and corporate counsel for Gulf Power in 1992. He was named to his current position in May 2013. Previously, he was executive vice president, general counsel and corporate secretary of Southern Company, president and CEO of Savannah Electric and vice president of power generation and transmission at Gulf Power. 8. James Y. Kerr II Executive Vice President and General Counsel Kerr, 51, assumed his current role in March 2014. Previously, he was a partner with McGuireWoods LLP and a senior advisor at McGuireWoods Consulting LLC. He also served as co-chairman of McGuireWoods’ energy industry team with focus in the areas of energy transactions and ﬁ nance, energy regulation, energy policy and energy litigation. Prior to joining McGuireWoods, Kerr served as a Commissioner on the North Carolina Utilities Commission and was the former president of the National Association of Regulatory Utility Commissioners. 9. Stephen E. Kuczynski 11. Christopher C. Womack Executive Vice President and President of External Affairs Womack, 57, joined the company in 1988 as a governmental affairs representative for Alabama Power. He has held his current position since January 2009. Previously, Womack was executive vice president of external affairs for Georgia Power. He has also served as senior vice president of human resources and chief people officer for Southern Company as well as senior vice president and senior production ofﬁ cer of Southern Company Generation. Chairman, President and CEO, Southern Nuclear Kuczynski, 52, joined the company in July 2011 as chairman, president and CEO of Southern Nuclear. Previously, he was senior vice president of engineering and technical services for Exelon Nuclear. He also served as senior vice president of Exelon Nuclear’s Midwest operations, senior vice president of operations support and plant manager and later site vice president of Exelon’s Byron Nuclear Station. 10. Mark S. Lantrip Executive Vice President Chairman, President and CEO, Southern Company Services, Inc. Lantrip, 60, joined the company in 1981 as an analyst in Gulf Power’s corporate planning department. He assumed his current position in March 2014. Previously, Lantrip was executive vice president of finance and treasurer of Southern Company Services and treasurer of Southern Company, with responsibility for financial planning and analysis, enterprise risk management, trust finance, capital markets and treasury. 8. 7. 9. 10. 11. Glossary APC Abbreviation for Alabama Power Company. Basic Earnings Per Share Excluding Kemper IGCC Impacts, Leveraged Lease Restructure Charge, And MC Asset Recovery Insurance Settlements Basic earnings per share in 2014 of $2.19 plus an excluded 59-cent charge related to Mississippi Power’s construction of the Kemper integrated gasifi cation combined cycle project and plus an excluded 2-cents related to the reversal of previously recognized revenues recorded in 2014 and 2013 and the recognition of carrying costs associated with the 2015 Mississippi Supreme Court decision which reversed the Mississippi Public Service Commission’s March 2013 rate order related to the Kemper IGCC project; basic earnings per share in 2013 of $1.88 plus an excluded 83-cent charge related to Mississippi Power’s construction of the Kemper IGCC project, plus an excluded 2-cent charge related to the restructuring of a leveraged lease invest- ment, and minus an excluded MC Asset Recovery insurance settle- ment of 2 cents; and basic earnings per share in 2012 of $2.70 minus an excluded MC Asset Recovery insurance settlement of 2 cents. Beta A measure of the volatility of a stock in comparison to the market as a whole. Beta can be described as the tendency of a security’s returns to respond to swings in the market. Book Value A company’s common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred and preference stock and intangible assets such as good will. Book value per share refers to the book value of a company divided by the number of shares out- standing. CO2 Abbreviation for carbon dioxide. Coal Gasifi cation A process in which the energy stored in coal is converted to gas, mak- ing it available for use in refi neries for the synthesis of chemicals or in gas-fi red power plants as a fuel. Desalination The process of removing salt, especially from sea water, so that it can be used for drinking or irrigation. Diluted Earnings Per Share A company’s earnings per share calculated by using fully diluted shares outstanding, including the impact of stock option grants and convertible bonds that can be converted into shares of stock in the issuing company. Dividend Yield The annual dividend income per share received from a company divided by its current stock price. Earnings Per Share Net income divided by the average number of shares of common stock outstanding. GPC Abbreviation for Georgia Power Company. Gulf Abbreviation for Gulf Power Company. Integrated Gasifi cation Combined Cycle (IGCC) A technology that uses a gasifi er to turn coal and other carbon-based fuels into synthesis gas (syngas). It then removes impurities from the syngas before it is combusted. This results in lower emissions of sulfur dioxide, particulates and mercury. HVAC Abbreviation for heating, ventilation and air conditioning. Kilowatt-Hour A unit of electricity equal to 1,000 watt-hours, delivered by an electric utility steadily for one hour. LED (Light-Emitting Diodes) Semiconductor devices that produce visible light when an electrical current is passed through them. LED lighting can be more effi cient, durable and longer lasting. Megawatt A measurement of electricity equal to 1,000 kilowatts and typically used when describing large amounts of generating capacity. mmBtu Abbreviation for Million British thermal units. MPC Abbreviation for Mississippi Power Company. Proton-Exchange Membrane Fuel Cell Vehicles Vehicles that are powered by proton exchange membrane fuel cells, a type of fuel cell being developed for transport applications as well as for stationary and portable fuel cell applications. Reliability As pertains to electric networks, the extent to which supply is avail- able to meet demand. Renewable Energy Energy generated directly from natural resources such as sunlight, wind, water, biomass, ocean tides and geothermal heat. SCS Abbreviation for Southern Company Services, Inc. System Average Interruption Frequency Index (SAIFI) SAIFI is the average number of times that a system customer experi- ences an outage during a year (or some particular time period under study). The SAIFI is found by dividing the total number of customers interrupted by the total number of customers served. Total Shareholder Return Stock Price appreciation plus reinvested dividends. (The distribution of shares of Mirant Corporation stock to Southern Company share- holders is treated as a special dividend for the purposes of calculating Southern Company shareholder return.) Energy Audit An onsite inspection in which recommendations are made for improv- ing the energy effi ciency of a home or business. TVA Abbreviation for Tennessee Valley Authority. Southern Company 2014 Summary Annual Report Southern Company 2014 Summary Annual Report Southern Company 36 Shareholder Information Transfer Agent Computershare, Inc. is Southern Company’s transfer agent, dividend- paying agent, investment plan administrator and registrar. If you have questions concerning your registered Southern Company shareowner account, please contact: Investor Information For information about earnings and dividends, stock quotes and current news releases, please visit us at www.investor.southerncompany.com. By Mail Computershare P.O. Box 30170 College Station, TX 77842-3170 By Phone-U.S. 9 a.m. to 7 p.m. ET Monday through Friday 800-554-7626 (Automated voice response system 24 hours/day, 7 days/week) Hearing Impaired: 800-231-5469 By Courier Computershare 211 Quality Circle Suite 210 College Station, TX 77845 By Phone-Outside U.S. 201-680-6693 Shareowner Services Internet Site To take advantage of Shareowner Services’ online services, you will need to activate your account. This one-time authentication process will be used to validate your identity. You can use your 12-digit Investor ID or your Computershare Holder ID. The Internet address is www.computershare.com/investor. Through this site, registered shareowners can securely access their account information, as well as submit numerous transactions. Also, transfer instructions and service request forms can be obtained. Southern Investment Plan The Southern Investment Plan provides a convenient way to purchase common stock and reinvest dividends. You can access the Southern Company website to review the prospectus. Direct Registration Southern Company common stock can be issued in direct registration (uncertificated) form. The stock is Direct Registration System eligible. Dividend Payments The entire amount of dividends paid in 2014 is taxable. The board of directors sets the record and payment dates for quarterly dividends. A dividend of 52.5 cents per share was paid in March 2015. For the remainder of 2015, projected record dates are May 18, August 17 and November 16. Projected payment dates for dividends declared during the remainder of 2015 are June 6, September 5 and December 5. Annual Meeting The 2015 Annual Meeting of Stockholders will be held Wednesday, May 27, at 10 a.m. ET at The Lodge Conference Center at Callaway Gardens, Highway 18, Pine Mountain, Ga. 31822. Auditors Deloitte & Touche, LLP 191 Peachtree St. NE Suite 2000 Atlanta, GA 30303 Institutional Investor Inquiries Southern Company maintains an investor relations office in Atlanta, 404-506-5310, to meet the information needs of institutional investors and securities analysts. Electronic Delivery Of Proxy Materials Any stockholder may enroll for electronic delivery of proxy materials by logging on at www.icsdelivery.com/so. Certifications Southern Company has filed the required certifications of its chief executive officer and chief financial officer under Section 302 of the Sarbanes-Oxley Act of 2002, regarding the quality of its public disclosures as exhibits 31(a)1 and 31(a)2, respectively, to Southern Company’s Annual Report on Form 10-K for the year ended Decem- ber 31, 2014. The certification of Southern Company’s chief executive officer regarding compliance with the New York Stock Exchange (NYSE) corporate governance listing standards, required by NYSE Rule 303A.12, will be filed with the NYSE following the 2015 Annu- al Meeting of Stockholders. Last year, Southern Company filed this certification with the NYSE on June 14, 2014. Environmental Information Southern Company publishes information on its activities to meet environmental commitments. This information is available online at www.southerncompany.com/planetpower/#reports. To request printed materials, write to: Larry Monroe Chief Environmental Officer & Senior Vice President Research and Environmental Affairs 600 North 18th St. Bin 14N-8195 Birmingham, AL 35203-2206 Common Stock Southern Company common stock is listed on the NYSE under the ticker symbol SO. On December 31, 2014, Southern Company had 137,369 shareholders of record. The 2014 summary annual report is submitted for shareholders’ information. It is not intended for use in connection with any sale or purchase of, or any solicitation of, offers to buy or sell securities. Visit our website at www.southerncompany.com Visit our Corporate Responsibility Report at www.southerncompany.com/corporateresponsibility Follow us on Twitter at www.twitter.com/southerncompany . o C g n i t n i r P n a c i r e m A : g n i t n i r P . s e g a W p i l i h P d n a f p e n h c S s e m a J : y h p a r g o t o h P r o a M j i . s n o i t a c n u m m o C p a e L : n g i s e D . n e d r a C a r u a L : w e i v e R l a i c n a n i F . m u l l o C c M l l e r r e T : t n e m e g a n a M j t c e o r P & g n i t i r W SOUTHERNCOMPANY.COM

Continue reading text version or see original annual report in PDF format above