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Executives

David M. Ratcliffe - Chairman of the Board, President, Chief Executive Officer

Thomas A. Fanning - Chief Financial Officer, Executive Vice President

W. Paul Bowers - President, Southern Company Generation Group

Analysts

Dan Eggers - Credit Suisse

Paul Ridzon - KeyBanc Capital Markets

Daniele Seitz - Dahlman Rose & Co.

Andrew Levi - Brandcorp

Ashar Khan - SAC Capital

Dan Jenkins - State of Wisconsin Investment Board

Paul Patterson - Glenrock Associates

Rudy Tolentino - Morgan Stanley

Steven Gambuzza - Longbow Capital

Nathan Judge - Atlantic Equities

The Southern Company (SO) Q4 2007 Earnings Call January 30, 2008 2:00 PM ET

Operator

Good afternoon. My name is Vonda and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company fourth quarter 2007 earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. David Ratcliffe, President, Chairman, and Chief Executive Officer; and Tom Fanning, Chief Financial Officer. You may begin.

David M. Ratcliffe

Thank you. Good afternoon and thank you for joining us. I am pleased to be with you for our fourth quarter earnings call. Joining me today is Tom Fanning, our Chief Financial Officer, and Paul Bowers, President of our Southern Company Generation Group, at least for another day.

Most of you know by now that Tom will become our Chief Operating Officer on Friday, February the 1st. Paul Bowers, who is also with us today, will become Chief Financial Officer. Paul has been active in our investor relations program and has already met many of you and I know that over the next few months, he intends to meet with the financial community to get to know you better.

Tom and Paul are key members of our management team and I know that they will do a great job in their new assignments.

As we move forward with the earnings call, let me remind you that we will make forward-looking statements today in addition to providing historical information. There are various important factors that 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 SEC filings.

I’d like to point out that now available on our investor relation website is a supplemental deck of slides highlighting the recent operational and financial results. These slides also provide details on information that will be discussed in today’s call, such as our current three-year forecast for capital expenditures and cash flows.

As you can see from the material we released this morning, we had a good quarter, completing an excellent year. The Southern Company 2007 was a year highlighted by several major achievements. First was a constructive outcome in the Georgia Power rate case, an agreement that was negotiated among the commission staff, Georgia Power, and several other parties should provide stability for customers and the company over the next three years.

With this three year agreement, an environmental tariff was put in place in Georgia. Therefore, we now have forward-looking environmental recovery mechanisms in all of our retail jurisdictions. This outcome, along with a formulary base rate mechanisms in Alabama and Mississippi, as well as no current expectations to file for base rate changes at Gulf, should contribute to a positive, highly effective, and stable regulatory environment for the next several years.

As a result of this constructive environment, effectively all of our capital expenditures for the next three years are covered in rates.

At a time of growing uncertainty about the economy, we believe our regulatory stability positions us well to deliver on our longstanding objective of reliable, predictable, and sustainable financial results for shareholders.

Another milestone in 2007 was the outstanding performance of our generating fleet during the summer peak season. We set a new all-time peak on August the 22nd of 40,870 megawatts, some 7.4% higher than the previous peak set in August of 2006.

Our peak season equivalent forced outage rating was 1.6%, well below the industry average, allowing us to save customers some $200 million in fuel costs. At a time when the load in our service territory surpassed 40,000 megawatts for 27 consecutive days, our transmission and distributions assets also performed extremely well. This continued strong performance is a result of Southern Company's ongoing commitment to expand our infrastructure to meet the needs of our customers. Making the right investments is a critical part of our overall plan to maintain electric reliability in our service territory and the Southeast.

Despite the prolonged stretch that was placed on our system, compounded by a severe drought, our customers did not experience a single major disruption to service. Our utility customers in other parts of the country experienced brown-outs or calls for voluntary load reduction. Service to our customers continued uninterrupted during some of the most challenging operational conditions we’ve experienced.

During 2007, we continued to make significant progress on our environment construction program. Since 1990, we have spent almost $5 billion on environmental control equipment and have reduced emissions almost 40%, while we increased production by 37% to meet the demands of our growing service territory.

Also pleased to note that for the eighth consecutive year, Southern Company achieved the highest ranking in customer satisfaction amongst electric utilities, as measured by the American Customer Satisfaction Index. That achievement is a direct result of the dedication and hard work by our more than 26,000 employees.

At this point, I will now turn the call over to Tom Fanning, our Chief Financial Officer, who will review our financial performance for 2007 and provide earnings guidance for 2008.

Thomas A. Fanning

Thank you, David. As you mentioned, we had a good quarter and another year of strong financial performance. In the fourth quarter of 2007, we reported $0.27 a share. That’s an increase of $0.02 per share from the fourth quarter of 2006. Excluding our synthetic fuel investments, we earned $0.26 per share in the fourth quarter, an increase of $0.01 per share from the fourth quarter of 2006.

For the full year, we reported $2.29 per share, an increase of $0.17 per share over the prior year. Excluding our syn-fuel investments, our earnings for the full year are $2.21 per share, an increase of $0.11 per share over our results for 2006.

Now let’s turn to the major factors that drove our numbers for the full year compared with 2006, excluding syn fuels. First, I’ll cover the negative factors. Here’s the breakdown.

Non-fuel O&M for our traditional operating companies reduced our earnings by $0.10 per share in 2007 compared with 2006. This is due primarily to normal escalation in fossil, hydro, and T&D costs.

Depreciation and amortization, and higher interest expenses reduced our earnings by $0.08 per share in 2007 compared with the prior year. These increases in depreciation and interest expense are due primarily to overall rate based growth for our traditional operating companies.

Accounting changes for our leasing business reduced our earnings by $0.02 per share in 2007 compared with 2006.

Finally, an increase in the number of shares outstanding due to issuances through our employee savings plan and dividend reinvestment plan reduced our earnings by $0.04 per share in 2007 compared with 2006.

So total negative factors reduce our earnings by $0.24 per share in 2007.

Now, let’s turn to the positive factors that drove our earnings. Retail revenue growth in our traditional business added a total of $0.23 per share to our earnings in 2007 compared with the prior year. This increase is due to three factors -- weather, economic growth, and changes in prices.

Weather added $0.04 a share to our earnings in 2007. Now, weather in 2007 was $0.07 positive compared to $0.03 positive in 2006. Continued economic growth in the Southeast added $0.05. The remaining $0.14 of revenue growth was primarily driven by changes in retail prices in ’07.

Total non-retail revenue for our traditional operating companies contributed $0.01 to earnings. Increases in AFUDC contributed $0.08 per share to our earnings in 2007 compared with 2006. The year-over-year increase is largely driven by the construction of environmental controls at our traditional operating companies.

A variety of tax items at our traditional operating companies added $0.02 per share to our earnings in 2007 compared with 2006.

Finally, Southern Power added $0.01 per share to our earnings in 2007 compared with the prior year. Southern Power's contribution was positive year over year despite an after-tax write-down in 2007 of $11 million associated with the cancellation of our IGCC project in Orlando.

So excluding syn-fuels, we exceeded our guidance range of $2.13 to $2.18 per share and our year came out at $2.21 compared with $2.10 in 2006.

Our total capital budget for the three year period 2008 to 2010 is expected to be $13.6 billion. The majority of this investment will be spent in two areas -- environmental equipment and transmission and distribution expansion.

As you know, we are in a period of significant capital investment for scrubbers, SCRs, and bag houses at our larger coal fire units during the three-year period through 2010. We are planning to invest approximately $3.9 billion in these and other environmental controls.

The other significant are of capital investment continues to be transmission and distribution, with a projected expenditure of $4.1 billion for the three year period. This investment will help ensure continued reliability and meet the requirements of customer growth in the region.

The impact of our growing investments should have a positive impact on our earnings outlook for 2008. I’ll provide additional information on this in the guidance discussion in just a few minutes.

As you may know, last July the Georgia Public Service Commission order Georgia Power to submit proposals by February 1st for new baseload generation in the 2016-2017 timeframe. The proposals should include a bid for a self-build baseload facility with the emphasis on low fuel price volatility, such as nuclear or coal.

Last month, the Georgia Public Service Commission granted Georgia Power’s request to extend the filing date of its application to certify resources chosen from these proposals. So filing, which was scheduled to be made by May 1st, is not expected to be submitted no later than August 1, 2008.

Georgia Power is continuing its negotiations with its nuclear vendors and in the meantime, the company is also exploring alternative proposals as requested by the commission. As always, we will keep you posted as this process moves forward.

Before we turn to guidance for 2008, I would like to take a minute to update you on the economic outlook here in the Southeast. As with the national economy, we have seen a slowing in the pace of activity in our region. However, compared with the United States economy as a whole, the Southeast remains more resilient. Job growth, growth in real personal income, and lower housing costs continued to attract inward migration from other higher cost regions.

As a result, households grew at almost twice the U.S. rate during 2007. Even though the growth rate of households is expected to slow in 2008, it is still expected to exceed the U.S. growth rate.

Employment growth in the Southeast, while expected to slow in 2008, is also likely to exceed the national rate. Kia Motors is expected to begin hiring in Georgia, as is ThyssenKrupp Steel Mill in Alabama.

Buoyed by a low dollar and an increase in direct foreign investment, the manufacturing sector, especially in autos, steel, chemicals, oil refineries and pipes, is still showing strength. In addition to Kia and ThyssenKrupp, the region is still seeing investment from an auto parts manufacturer from Korea, a copper wire manufacturer from Malaysia, and a rail car producer from Canada.

Finally, the Southeast has also felt the impact of a declining housing sector. While the U.S. housing sector began to decline in the first quarter of 2006, we did not experience any major declines in this sector until the third quarter of 2007.

Housing markets in the Southeast are expected to bottom out in the second quarter of ’08 and recover between 2009 and 2010.

In previous periods of economic slowdown, the Southeast typically was impacted less than other parts of the country and tended to recover faster than other regions. As you can see, we expect that will be the case in this cycle as well.

Let’s turn now to our financial goals and earnings outlook from 2008. We’ve already touched on many of the factors that will shape our financial outlook for the next few years -- a capital budget with significant investment in environmental controls and load serving infrastructure, a constructive and stable regulatory environment, and a growing service territory.

To achieve our objective of providing shareholders a superior risk adjusted return over the long-term, our financial plan assumes top quartile ROE performance, which in turn supports a growing, stable dividend, and industry leading financial integrity. Our goal is to grow the dividend consistent with a target power ratio of approximately 70%. Since 2005, we have grown our dividend annually by 4%.

Finally, we are committed to maintaining our industry-leading financial integrity, both in our credit metrics and in our business model.

Now let’s turn to a discussion of our guidance. To establish our 2008 range and in recognition of the significant increase in our capital investments, we first grew our 2007 guidance range by 8%, from $2.13 to $2.18 per share, now to $2.30 to $2.36 per share.

Additionally, while we believe the Southeast is better positioned than most of the nation to weather the slowdown in the economy, we believe that widening our potential range in recognition of the current economic uncertainty is a prudent step. We will do this by expanding the range at the bottom by $0.02. So the resulting range for 2008 is $2.28 to $2.36 per share.

Beyond our annual guidance for 2008, we are forecasting a long-term earnings per share growth rate average 6%.

So again, with the one-time step-up of 8% and an adjustment for potential economic challenges, our EPS guidance range for 2008 is $2.28 to $2.36 per share, and our new long-term growth forecast is 6% on top of this range.

Finally, to complete our discussion of earnings per share for this year, our estimate for the first quarter of 2008 is $0.39 per share.

At this point, I will turn the call back to David for his closing remarks.

David M. Ratcliffe

As you just heard, our businesses are performing well and based on the solid foundation that we prepared in 2007, we look forward to another successful year in 2008. I believe 2008 will be a year of execution -- a year in which we continue to execute our large environmental construction program; a year in which we reached decisions on new generation in Georgian and began to execute those decisions.

2008 is also a year in which Southern Company will expand our emphasis on energy efficiency. Starting this year, we will begin an aggressive rollout of our automated metering program called Smart Meter, with a goal of installing more than 4 million devices across our system over the next few years.

The installation of automated metering is significant for several reasons. Obviously it makes the reading of customer meters more efficient than traditional meter reading. It also enables us to obtain valuable information about usage patterns amongst our customers. But the real long-term value of automated metering is that we are putting more information in the hands of the customer as to how and when they use our product. Having the hardware in place to communicate in real time with our customers will expand our program of energy efficiency.

The installation of automated metering will give us the ability to send a real-time price signal to our customers and more importantly, give them the choice as to how and when they want to respond to that price signal.

Finally, before we take your questions, I am looking forward to seeing many of you at our analyst meeting in Atlanta on February 25th and 26th. We’ll be providing more detail on the subjects covered in today’s call and, as is our practice, the business portion of the meeting will be webcast and posted on our website.

At this point, Tom and Paul and I would be happy to take any questions that you might have. Operator, we’ll now take the first questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Dan Eggers with Credit Suisse.

Dan Eggers - Credit Suisse

With the drought conditions you guys have had, particularly in Georgia, a lot of press stories going on as far as risk to nuclear assets running. Can you just give us a run-down of where your plants are and any potential exposure to those plants having to dial back given water conditions?

David M. Ratcliffe

I’ll let Paul take that question.

W. Paul Bowers

Primarily when you look at our plants, you saw some of our cycling in 2007 due to just thermal conditions. But our contingency plan for 2008, given the average rainfall that we’ve experienced, it seems to be that we will not have to do very much with those plants in terms of cycling.

We’re predicting that we’ll be in good shape going forward. Right now, when we look at our basins, our pools, if you will, or -- we are approaching winners pool status, which is gaining some level of water in the lakes right now. Still, it’s going to take about 18 months to 24 months before, if we get average rainfall, before we get back to normal.

David M. Ratcliffe

I think it’s all dependent on, as Paul said, it’s all dependent on how much rainfall we get during the spring. We’ve gone through all of our facilities, pretty thoroughly looking at contingency operating plans. We made it through this past summer. We think this summer will be about the same.

Dan Eggers - Credit Suisse

Does this open up a window of opportunity on the Southern Company side as far as the ability to sell more power or run those assets a little better in ’08 if other people are running into these problems?

Thomas A. Fanning

Well, we clearly saw that in ’07. In ’07, it’s interesting and you’ll see this in the financial results with Southern Power, Southern Power plans, which are all gas-fired plants, ran a lot more than what we had budgeted. We had budgeted a capacity factor for the combined cycle units of around 17%. Actually, they ran about 30%.

Now, in recognition of some of these kind of same effects persisting into 2008, notably the drought, remember last year we had pretty extreme weather during August, we are slightly increasing the capacity factor budgeted from 17 to about 20. But yeah, there is some opportunity there.

Dan Eggers - Credit Suisse

And how much of that capacity is open to the market in 2008?

Thomas A. Fanning

Well, about 90% of it or so is covered under contracts. We have some uncovered capacity that’s available.

Dan Eggers - Credit Suisse

Got it. Thank you, guys.

Operator

Your next question comes from the line of Paul Ridzon with KeyBanc.

Paul Ridzon - KeyBanc Capital Markets

I hope your operations department is stocked up on coffee.

David M. Ratcliffe

We’ve got coffee everywhere here, Paul. You can’t do without the stuff.

Paul Ridzon - KeyBanc Capital Markets

It sounds like you are taking your dividend growth rate to 6%, given that you’re at 70% now. Is that 70% payout?

Thomas A. Fanning

No, our projections are that we would maintain a 4% growth rate. Of course, that’s the purview of the board of directors, but our financial projections show that we would stay at four for the next few years.

Paul Ridzon - KeyBanc Capital Markets

And then grow it with earnings when you get stabilized at 70?

Thomas A. Fanning

That’s correct.

Paul Ridzon - KeyBanc Capital Markets

Okay. Thank you.

Operator

Your next question comes from the line of Daniele Seitz with Dahlman Rose.

Daniele Seitz - Dahlman Rose & Co.

I was wondering, what was your reserve margin because the Southeast always seemed to be awash with capacity and I was wondering if this drought added to extraordinary weather reduced reserve margins substantially this year and how does it look normalized?

David M. Ratcliffe

Well, our planning reserve margin is 15% and I don’t know if you looked, we set five successive peaks in August when the temperature was 100 degrees in the Southeast. I don’t know exactly what the reserve margin was on the peak date but I don’t think we are concerned about any significant deterioration of reserves at all.

W. Paul Bowers

[inaudible] available to call upon which provides significant [inaudible] which we did not call during the drought period this year when we set our all-time peaks.

Daniele Seitz - Dahlman Rose & Co.

So it’s more a matter of region, because I remember in one of your previous conferences you were saying that in the worst case scenario, you could not imagine any difficulty with reserves until 2009, 2010. Is this still along the line of your plans at this time?

Thomas A. Fanning

What you are referring to is our estimate of when different regions of the South --

Daniele Seitz - Dahlman Rose & Co.

Yes, yes.

Thomas A. Fanning

-- will come into equilibrium and we kind of said that Vacar was probably in equilibrium right now, Florida is fast approaching it, Entergy is sometime beyond the end of the decade, and then we were about 2010 ourselves.

Daniele Seitz - Dahlman Rose & Co.

I was wondering if this had changed since you had mentioned that. The other question I had is when do you think you may need some additional equity? Or do you think that the dividend reinvestment and all that will just take care of it?

Thomas A. Fanning

First of all, we don’t think the equilibrium outline I just gave would change materially. Secondly, we are handling our equity requirements just fine through the savings plan, through the drip, and we anticipate getting a shade on the average over $500 million a year for the next three years. That will do us just fine.

Daniele Seitz - Dahlman Rose & Co.

Great. Thank you.

Operator

Your next question comes from the line of Andrew Levi with Brandcorp.

Andrew Levi - Brandcorp

Just to make sure I heard it right, and I heard it right last time, I think last time earnings per share growth, you were talking 4% to 6% as far as future growth, and now you are saying a straight 6% -- is that correct?

Thomas A. Fanning

Yeah, let’s clarify that. What we said -- long-term rate was 5% with a near-term variability of 4% to 6%, given kind of extreme weather and normal economic uncertainty.

What we’ve done here, given the pace of investment in environmental and T&D particularly, is we have increased our range 8% and then we made a slight adjustment on the downside to account for a greater economic uncertainty this year.

Now, beyond that, what you would normally do is just multiply that range by our new long-term growth rate, 6%. So you would multiply the top and the bottom both by 1.06 to get the next range and the next range and the next range.

Andrew Levi - Brandcorp

And how many years should we go out on that 6%?

Thomas A. Fanning

Well, all we disclosed is three.

Andrew Levi - Brandcorp

Three. Okay, perfect. Thank you very much.

Operator

(Operator Instructions) Your next question comes from the line of Ashar Khan with SAC Capital.

Ashar Khan - SAC Capital

Tom, could you just -- for guidance for 2008, could you break it up between Southern Power and the utility, please?

Thomas A. Fanning

Sure. Basically the formulation that we have had remains, except that we have increased the contribution from Southern Power. Now, let me fill that out a bit, starting with Southern Power.

You may remember in last year’s January earnings call, we projected Southern Power to earn about $115 million. Southern Power this year earned around $132 million. Remember that there was an $11 million write-off associated with canceling the Orlando project, so if you add it back, they actually earned about $143 million this year.

One of the reasons why we though the numbers would be down at 115 last year was that we were adopting a heightened separation protocol at Southern Power and that was going to average we thought about $9 million a year.

So we are seeing -- last year we had not a complete full year of all those costs. This year, we will. Plus remember last year we had some pretty extraordinary circumstances relating not only to the weather but also to the drought, which caused the high capacity factors I mentioned in our gas plants.

So what we are projecting for this three-year period is for Southern Power to earn about $135 million for each of the next three years. For the operating company, you should keep the same formulation that we’ve kind of had in the past and what was suggested in the script -- that is, the target for our traditional operating companies is to earn about a 13.5% return. Now, allowing for the economic uncertainty, particularly in 2008, I’m not sure that we’ll get there or not and that’s why we expanded the bottom of the range.

We provided in the package of slides our history on achieving 13.5% and you may remember, 2001 was a year in which we had some economic challenges.

So just follow that same formulation and that will break it out for you.

Ashar Khan - SAC Capital

And then Tom, just going back to what you said, you said you had budgeted a 17% capacity factor in ’07 and it came out to be 30%.

Thomas A. Fanning

That’s right.

Ashar Khan - SAC Capital

Did that 13% improvement, was that the cause for [inaudible] going from 115 to 140 like, nearly like $25 million? So if the conditions repeat themselves and you do do another 10% or 13% higher, can we assume that 13% higher capacity factor equates to something like $25 million more in net income?

Thomas A. Fanning

I wouldn’t attribute all of that -- you know, you have a slug of O&M in there probably, that probably amounts to about $5 million or so of an under run. The other issue in there were gas prices were higher than budgeted. That benefits our heat rate margins.

W. Paul Bowers

There’s a couple of other items, too. You had your start revenues that show up as -- those units that are being called, remember they are under a capacity contract, so as those units are being called up/down, they get additional revenues from that and then there’s a heat rate efficiency, if you will, for those units.

Thomas A. Fanning

Yeah, the higher the gas price actually turns out to be, the more value you get by achieving an excellent heat rate, so we earn some benefits there.

Ashar Khan - SAC Capital

And then if I can just end up, can you just talk about the profile you had mentioned on Southern Power beyond these three years?

Thomas A. Fanning

Yeah, what we said was that we had signed some new agreements, particularly Rowen and just looking around the Southeast coming into equilibrium, just by the presence of these contracts ramping up, as well as the value of capacity going up beyond 2010, we see the profit contributions of Southern Power increasing in that timeframe.

Ashar Khan - SAC Capital

[Are you able to] quantify that, Tom?

Thomas A. Fanning

Well, we don’t like to talk about projections beyond the three year timeframe but I’ll just say they increased pretty significantly.

Ashar Khan - SAC Capital

Okay. Thank you.

Operator

Your next question comes from the line of Dan Jenkins with State of Wisconsin.

Dan Jenkins - State of Wisconsin Investment Board

Looking at page five of your release, at basically the weather adjusted changes by customer class, particularly in the residential you had a negative 0.8. Is that the slowdown you are seeing from housing or is there something else going on there, or --

Thomas A. Fanning

Well, some of it is but there’s a real -- and I know you guys are just waiting with baited breath here -- there is an interesting weather fact that occurred during the fourth quarter. First of all, let me hit the housing issue.

You’ll also notice our customer growth slowed a bit from 1.7% to 1.3%. What you see is normal inventory of unsold homes in the Southeast as a percent of total homes is about 2.4% and just in the third, into the fourth quarter, it increased up to 4%. So those still count as customers but usage is way down, just because nobody is living there. So that is driving some of the effect on residential usage, okay?

Now to the weather adjustment. It’s pretty interesting. When you look at the quarter, we were $0.01 below normal for the fourth quarter. But what was interesting was in the -- and you have to compare this against commercial, which is pretty interesting -- we had $0.01 better than expected, better compared to normal, weather in October. That really related to more heating load and essentially the way that manifested itself among our customer classes is our residential customers tended to just open the windows, whereas our commercial customers ran their air conditioners, since they can’t open the window, they ran their air conditions more to make up the difference.

So you saw an opposite effect on those two classes due to that $0.01 in weather in October and that’s the difference.

Dan Jenkins - State of Wisconsin Investment Board

You mentioned that you have a number of plants or new industrial customers, you know, the Kia and the steel plant and so forth -- will that impact the industrial growth above normal in ’08 or was that kind of still at a normal growth level? How should we think about that?

Thomas A. Fanning

Everything that we’ve talked about so far, we’ve taken into account. I guess to my knowledge, there is only one customer, a Korean tire manufacturer has announced he’s moving to Georgia. This is associated with the expansion of the automotive industry in the Southeast. You know, we’ve talked a lot about Honda, Hyundai, Mercedes-Benz. We’ve talked about Kia. Now we are starting to see filling out the first, second, and third-tier suppliers.

Another interesting fact that we’ve seen, at least this anecdote goes to Georgia, is that you know that for new customers in Georgia, 900-kilowatts and above, they are open to choice as to who their supplier is and it was a record year in the State of Georgia. The customer choice market was 1.8 billion kilowatt hours and that’s the biggest customer choice market we’ve ever seen. So I think that is another shred of evidence of more customer growth, more economic growth in the Southeast. And Georgia Power won something like 85 -- more than 85% of those deals.

So I think it’s a pretty exciting market for us.

Dan Jenkins - State of Wisconsin Investment Board

What was the size of those customers, did you say that had the choice?

Thomas A. Fanning

900-kilowatts and above.

David M. Ratcliffe

It’s an interesting program. It’s been in effect for over 25 years. It’s retail competition for 900KW and above.

Thomas A. Fanning

So we’ve actually had a competitive market in the Southeast even within the structure of our integrated regulated framework for a long time.

David M. Ratcliffe

We were doing competition before competition was cool.

Dan Jenkins - State of Wisconsin Investment Board

Also, I was wondering what’s the refueling schedule in ’08 versus ’07? Will that have any impact or is it similar?

Thomas A. Fanning

Hold on a sec -- here we go. Let’s see -- Farley will have no outage for refueling. Farley 1 will have no refueling outage in ’08. Farley 2 will have a refueling outage in the fall of ’08. Hatch 1 will have an outage in the spring. Hatch 2 will not have a refueling outage in ’08. Volgel 1 will have a refueling outage in the spring. Volgel 2 will have a refueling outage in the fall.

And of course, outage costs for us are normalized. It depends on which plant it is, it’s either over 18 to 24 months.

Dan Jenkins - State of Wisconsin Investment Board

Okay, and then I was just curious on your projected capital investments, your 2008, 2010. You broke out the environmental in a lot of detail but I was curious the new generation, how that’s split between the regulated and the Southern Power, and then how much of that’s in ’08.

Thomas A. Fanning

Sure. When you look at the deck of slides we’ve given out there, it looks to me like that’s slide six. If you look at the Southern Power line down there, that’s new generation theoretically, okay? That’s theirs, and then if you go up -- let’s see -- if you look at new generation for the core companies, the numbers kind of go like this: $300 million in ’08; $700 million in ’09; $700 million in ’10. Most of that is associated with the McDonnell units in Georgia. Remember we’re building three 840-megawatt combined cycle units inside the perimeter highway in Atlanta.

Dan Jenkins - State of Wisconsin Investment Board

Okay, and then the last thing is if you could give me some guidance on what you think you’ll have to come to the market with for new financing in say the first half of ’08?

Thomas A. Fanning

Why certainly -- here we go. What we plan to do in ’08, we’ve already done $300 million of senior notes in Alabama. We have -- do you want the first half of the year?

Dan Jenkins - State of Wisconsin Investment Board

Right.

Thomas A. Fanning

Alabama will do another $400 million or so of senior notes. Georgia will do about $300 million of senior notes; Gulf will do about $80 million of senior notes; Mississippi will do about $100 million of senior notes, and that’s through June.

Dan Jenkins - State of Wisconsin Investment Board

Thank you.

Thomas A. Fanning

Certainly. Thanks for calling in.

Operator

Your next question comes from the line of Paul Patterson with Glenrock Associates.

Paul Patterson - Glenrock Associates

Listen, I got on the call a little late, so I apologize if you guys went over this but the new nuclear outlook, is there any update there in terms of cost and what you guys might be seeing going forward?

David M. Ratcliffe

There really isn’t an update. What we said is we continue to work with Westinghouse to negotiate terms and conditions of contract that we hope to be able to put in before the Public Service Commission in Georgia some time as we said by August, and we are just continuing those negotiations.

Paul Patterson - Glenrock Associates

Is there any range on costs, or just sort of an approximation? I know you are negotiations, so I mean I know that maybe you don’t have a point estimate, but I’m just wondering if you could just give us maybe a little flavor for what you might be seeing?

David M. Ratcliffe

No.

Paul Patterson - Glenrock Associates

Okay, guys. Thanks.

Operator

(Operator Instructions) Your next question comes from the line of Dan Eggers with Credit Suisse.

Dan Eggers - Credit Suisse

Paul asked my nuclear question. Thank you.

Operator

Your next question comes from the line of Rudy Tolentino with Morgan Stanley.

Rudy Tolentino - Morgan Stanley

Can you just remind me -- I know Southern Company has got a number of projects that you are building -- Franklin, Rowen, and Stanton. Can you just remind me where those projects stand and what their commercial land line dates are?

David M. Ratcliffe

Franklin 3 is currently under construction. We’ll bring it on commercial operations this summers to test it through the six months of the year, and then it actually goes to a contract in 2009.

We have a CT, combustion turbine, being built in Florida that is under contract and it came online before January 1.

The Stanton project is really a project for Orlando Utilities Commission that we are building a combined cycle one-on-one unit that is theirs. As you’ll recall, we had that tied to a [dissertation] project that was canceled earlier last year.

Rudy Tolentino - Morgan Stanley

Okay, and as far as -- are there new contracting opportunities that you see coming up for the next three years?

Thomas A. Fanning

Sure but it’s our practice not to talk about.

Rudy Tolentino - Morgan Stanley

Okay. Thank you very much.

Operator

Your next question comes from the line of Steven Gambuzza from Longbow Capital.

Steven Gambuzza - Longbow Capital

On the nuclear question, the August date that you referenced, I guess I was under the impression that you were filing with the Public Service Commission in March and that they would render a decision in December, so what exactly happens in August?

David M. Ratcliffe

I think as we went over the script, we indicated that we had requested and the commission had agreed an extension of the timeframe to August.

Steven Gambuzza - Longbow Capital

Okay, so that is when the first filing will happen -- no longer in March?

Thomas A. Fanning

That’s correct.

Steven Gambuzza - Longbow Capital

Okay, and then I just wanted to clarify the outlook for Southern Power -- it was that the net income would be relatively flat for the three-year forecast period but that the portfolio development contracts that you’ve previously announced would start to impact results post 2010 -- is that correct?

Thomas A. Fanning

That’s right, and remember, that’s up significantly from the last financial plan you saw. What we said was 115 and then marginally increasing over the three-year period. Now we are saying 135 and we’re just keeping it at 135 for the three-year period.

Steven Gambuzza - Longbow Capital

Okay. Thank you very much.

Operator

Your next question comes from the line of Nathan Judge with Atlantic Equities.

Nathan Judge - Atlantic Equities

I have two questions -- actually, could you just give us a little bit more color on why the nuclear filing has been delayed? I think this is the second delay or extension that’s been requested. What is going on? Is it just discussions with your contractors or is there just not enough bids in or what’s going on there?

David M. Ratcliffe

Well, what we’ve done, as you know, is we’ve selected the Westinghouse technology, so we’ve been intensively working with the consortium of Westinghouse, Toshiba, and Shaw to try to come to terms and conditions. And I said earlier I think to some folks that were here in town a couple of weeks ago that everybody who is involved in this process, not just Southern and Westinghouse but it is my understanding that all of the other folks are just having a difficult time getting their hands around commodity pricing, escalation provisions, risk associated with the long-term nature of the construction program and how and who and exactly how to deal with all of those issues.

So I don’t think we’re experiencing anything that the industry is not experience.

Nathan Judge - Atlantic Equities

Thank you. And then just a follow-on the Mississippi IGCC plant. Could you just give us a timeline and milestones there?

David M. Ratcliffe

Well, we’re working with the State of Mississippi and the Mississippi Power Company and DOE to look at the potential. As we talked about I think in earlier calls, the potential to demonstrate the IGCC technology that we’ve developed with KBR at the Kemper County location. We just continue to work on the details of that. Hopefully by sometime by the end of this year, we will know whether or not we are going to go forward with that project.

Nathan Judge - Atlantic Equities

Great, and then just one other last thing on the integrated resource plan that you filed in Georgia, there’s quite a few marginal coal plants out there that, given a variety of environmental restrictions of things, could potentially be subject to economic shutdown.

When you look out over the next several years, clearly you’ve got retrofits and how fixed is that budget for the CapEx plan for the retrofits that you have in your budget?

Thomas A. Fanning

Let me give a little bit of color there. The predicate of the question I want to clarify, that you have to see pretty strong price signals on a cost per ton in a carbon controlled environment before we turn down very many of our coal units. And we think that would occur very much later in the next decade, if at all, so we just have to see about that.

I would say anywhere in the near term, that is absolutely [uncertain] to be minimal in effect.

The question on how much variability or on I guess the flipside, how much certainty there is with respect of environmental controls on our coal plants in this forecast period, these next three years, I would say there is a great deal of certainty. Remember that the strategy is we are controlling almost completely our flagship units -- that would be Bowen, Sheer, Miller, those units, and then in the future period where we had more optionality with respect to our plans, we can consider smaller older plants on the margin.

But over this next three year period, a great deal of certainty, I think.

Nathan Judge - Atlantic Equities

Great. Thank you very much.

Operator

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

David M. Ratcliffe

Yes, Operator. Thank you. Let me thank all of you for joining us today. This is a bit of a milestone event, as I said when we began. This is Tom Fanning’s last earnings call as the CFO. We may let him come back as an Alumni, but this will probably be his last call as the CFO of Southern Company, so Tom, do you have any closing remarks here?

Thomas A. Fanning

Well, thanks, David. The only thing I’d want to say is I had such a delightful time dealing with you folks. I’ve known many of you before I had the job and it’s been so much fun to enjoy the give-and-take over these past few years. As COO, I’m not going anywhere and the other thing I just want to say is that Paul Bowers will come on and I think do a spectacular job. He already has a broad grasp of the business from marketing to generation to environmental to research and development. So I think he’ll really add a lot and just do a wonderful job. So I just applaud his move into this role and I think he’ll do great.

Thanks very much for all of your association over these past few years.

David M. Ratcliffe

We look forward to seeing all of you at the analyst conference who can make it. Operator, thank you very much.

Operator

Thank you. This concludes today’s Southern Company fourth quarter 2007 earnings conference call. You may now disconnect.

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