Q2 2010 Earnings Call
July 28, 2010 1:00 pm ET
Glen Kundert - Vice President of Investor Relations
Thomas Fanning - Chief Operating Officer and Executive Vice President
W. Bowers - Chief Financial Officer and Executive Vice President
David Ratcliffe - Chairman, Chief Executive Officer and President
Michael Lapides - Goldman Sachs Group Inc.
Dan Eggers - Crédit Suisse AG
Greg Gordon - Morgan Stanley
Paul Patterson - Glenrock Associates
Vedula Murti - Tribeca Global Management
Angie Storozynski - Macquarie Research
James von Riesemann
Paul Ridzon - KeyBanc Capital Markets Inc.
Ali Agha - SunTrust Robinson Humphrey Capital Markets
Carrie Saint Louis - Fidelity
Marc de Croisset - FBR Capital Markets & Co.
Nathan Judge - Atlantic Equities LLP
Dan Jenkins - State of Wisconsin Investment Board
Raymond Leung - Goldman Sachs
Daniele Seitz - Dahlman Rose
Steven Fleishman - BofA Merrill Lynch
Thanks, Glenn, and good afternoon, and thanks to all of you for joining us. I'm sure most of you are aware by now the changes in our senior management team that we announced yesterday. With my retirement from Southern Company on December 1, we have begun a transition in the office of the Chief Executive. Tom Fanning, who many of you know very well from his four years as Chief Financial Officer, will become President of Southern Company on August 1. Tom is also with us on the call this afternoon. Paul Bowers will be moving to Georgia Power on August 13 as Chief Operating Officer, while Art Beattie, who is also with us today, will become the Chief Financial Officer. Tom, Paul and Art are key members of our management team and are well prepared for their new assignments, and I know will do an outstanding job for us.
As you can see from the materials we released this morning, we had a good second quarter, which was influenced by favorable weather and the continuing economic recovery here in the Southeast. Since our last earnings call in April. We've had three significant new regulatory developments in our Retail business, including a rate case filing by Georgia Power. Paul will cover the rate case filing in more detail in a few minutes.
First on May 26, the Mississippi Public Service Commission approved the construction of our 582-megawatt coal gasification project in Kemper County, Mississippi. Yesterday, the South Mississippi Electric Power Association signed an agreement to purchase 17.5% of the plant to fill the projected capacity requirements of its members.
The plant, which will use Mississippi lignite coal is scheduled to be placed in service in May 2014. The facility has a construction cost estimate of $2.4 billion. The project, which will feature 65% carbon capture capability has qualified for nearly $700 million in federal incentives, including $412 million in investment tax credits and $270 million in clean coal power initiative funding. In addition, we're in advanced due diligence discussions for federal loan guarantees.
Mississippi Public Service Commission has also approved the construction work in progress mechanism, which will begin in 2012 and continue through the end of May 2014. We're pleased to now be under construction with the Kemper County project. We believe this plan is clearly the best choice for our customers. And to repeat what Secretary of Energy, Steven Chu, wrote recently and I quote, "The project is of national importance because it provides a viable option for using our abundant coal resources in a cost-effective manner and reducing power plant emissions."
My second update concerns our Vogtle nuclear project. Last month, we announced that Southern Company and the Department of Energy agreed to conditional terms on the nuclear loan guarantees in the 3 and 4 Plant Vogtle. Under the conditional agreement, the loan would not exceed 70% of the company's eligible projected cost or approximately $3.4 billion, and is expected to be funded by the Federal Financing Bank. The loan would be full recourse to Georgia Power and secured by lien on the company's 45.7% interest in the two new units.
The loan is expected to save Georgia Power's customers between $15 million and $20 million annually in interest costs. The actual amount of the interest savings will depend upon the final terms and the timing of this specific borrowing. Final approval and issuance of the loan is subject to the receipt of the combined construction and operating license from the Nuclear Regulatory Commission and satisfaction of other conditions.
NRC's current schedule calls for finalization of its design-control document review by October 2011, and we would expect to receive the COL by the end of 2011. As you know, the company received an Early Site Permit and Limited Work Authorization from the NRC in 2009, and site work has been underway since that time.
At this point, I'll turn things over to Paul for a discussion of our financial highlights for the second quarter and our earnings guidance for the remainder of 2010.
Thank you, David. First of all, let me say how much I've enjoyed working with all of you as CFO during the past two and a half years.
Now as David said, our second quarter performance was good. The results continue to highlight the consistency of our business plan to provide regular, predictable and sustainable performance over the long term. In the second quarter 2010, we reported $0.62 a share compared with $0.61 a share in the second quarter of 2009 or an increase of $0.01 a share. Let's turn now to the major factors that drove our second quarter numbers compared to the second quarter of 2009.
First, the negative factors. Non-fuel O&M reduced our earnings by $0.07 a share in the second quarter of 2010 compared to the second quarter of 2009. This change is primarily due to a return to normal maintenance spending in 2010 for both our fossil and hydro generation fleet and our Transmission and Distribution network. On the generation side, approximately 3,000 more megawatts were involved in plant outages in the second quarter compared to the second quarter of 2009.