July 25 (Bloomberg) -- Southern Co., the second-largest U.S. power company by market value, said second-quarter profit rose as it benefited from economic recovery in the four southeastern states it serves.
Net income rose to $623 million, or 71 cents a share, from $604 million, or 71 cents, a year earlier, Atlanta-based Southern said in a statement today. Excluding an insurance settlement related to its former Mirant Corp. subsidiary, per-share profit met the 69-cent average of 13 analysts’ estimates compiled by Bloomberg.
Southern added 20,000 new residential customers in the first half of 2012, more than it had expected to gain for the year. “The future continues to look bright for our region,” Chairman and Chief Executive Officer Thomas Fanning said in the statement.
Sales fell 7.5 percent to $4.18 billion from $4.52 billion a year earlier, because of unusually warm weather during the second quarter of 2011 and the effect of lower fuel costs on rates as Southern switched from coal to cheaper natural gas, Arthur Beattie, Southern’s chief financial officer, said in a phone interview today.
Demand for power declined as consumers ran air conditioners less than a year earlier, Mark Barnett, a Chicago-based equity analyst with Morningstar Inc., said in a phone interview before the results were announced.
Excluding the effects of weather, residential sales rose 2.1 percent, commercial sales increased 1.2 percent and industrial growth was essentially flat, Beattie said.
Southern also faces potential cost overruns and delays as it builds the first new U.S. nuclear reactors since the 1970s. Fanning said that Southern and its partners continue to negotiate who should pay $400 million in costs resulting from a half-year delay in licensing the two reactors at Vogtle, 26 miles (42 kilometers) southeast of Augusta, Georgia.
“Everyone should view that as a normal part of the process,” Fanning said during a telephone interview today. “They’ve made a commercial claim, we dispute their claim and so we’re having discussions how to resolve and move it forward.”
Southern sees $2 billion in potential savings to the $14 billion nuclear project, primarily from lower financing costs, Fanning said. Southern has paid a weighted average of 3.7 percent interest on $2.5 billion of debt it has financed this year, Beattie said.
Southern hasn’t yet been able to reach an agreement with the Department of Energy on $8.3 billion in backstop financing for Vogtle. Following the bankruptcy of solar power company Solyndra LLC, the government is insisting on “a whole new set of terms and conditions that in our opinion really don’t apply to our project,” Fanning said.
“We are hopeful of reaching a successful resolution,” he added. “If our customers are not well-served, we will not go forward with a loan guarantee.”
Southern has 4.4 million customers in Alabama, Mississippi, Georgia and Florida and the capacity to produce 42,000 megawatts of electricity, according to its website. That’s enough power for about 33.6 million typical homes, according to a U.S. Energy Department estimate.
Southern rose 0.6 percent to $47.40 at the close in New York. The shares have three buy, 15 hold and four sell recommendations from analysts.
Duke Energy Corp. is the largest U.S. utility owner by market value.
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