This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Southern Comfort

This article originally appeared on Jan. 31, 2014, on RealMoney.com. To read more content like this plus see inside Jim Cramer's multimillion-dollar portfolio for FREE... Click Here.

The Southern Company (SO - Get Report) has some good news: Both revenues and earnings exceeded expectations. While a solid quarter is good news, Southern announced even better news.

Its forward costs are going to drop. Management successfully negotiated a loan guarantee with the Department of Energy (DOE) for their new nuclear power plants. It appears all but certain Southern secured a federal loan guarantee for approximately $8.33 billion. The guarantee will lower Southern's construction costs for its new Alvin W. Vogtle Nuclear Power Plant Units 3 and 4.

Here is how it works: Interest used for utility construction is often capitalized. The higher the interest rate, the higher the capitalized cost. If a utility can lower its interest expenses, it can lower its construction costs. The lowest interest rates available are usually from the federal government. Therefore, a federal loan guarantee lowers construction costs.

The winners are shareholders and consumers. Consumers will have the reliability of nuclear power at the lowest possible cost. They will also have cleaner air and cleaner water.

Must Read: Jim Cramer: Chipotle's Simple Winning Ways

Nuclear power is a carbon-free source of energy. It emits no greenhouse gases. Plant Vogtle will displace dirty power watt for watt. The new units will displace more than 2,200 continuous megawatts of hydrocarbons for five decades. That is the equivalent of displacing approximately 30 old, inefficient and dirty power plants.

Southern's federal loan guarantee has another impact. It reinforces the commitment to finish Plant Vogtle's construction. The guarantee makes it difficult for Southern or the State of Georgia to walk away from construction. Those commitments are important because finishing nuclear construction is not easy.

Anyone who followed the Solyndra debacle knows that defaulting on a federal loan guarantee has serious consequences. Not only does a default wipe out equity holders, shareholders and executives become subject to federal investigations and potential criminal charges.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Markets

Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs