SOUTHERN CO

For the period ended Dec 31, 2023. Filed Feb 15, 2024.

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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.

FY2023 · Filed Feb 15, 2024

SO$93.65+0.1%Stored close · as of Nov 10, 2026

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Southern Power and Subsidiary Companies:

To the stockholder and the Board of Directors of Southern Power Company and Subsidiary Companies

We have audited the accompanying consolidated balance sheets of Southern Power Company and subsidiary companies (Southern Power) (a wholly-owned subsidiary of The Southern Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2023, the related notes, and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Southern Power as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of Southern Power's management. Our responsibility is to express an opinion on Southern Power's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Southern Power in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Southern Power is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of Southern Power's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Audit Committee of Southern Company's Board of Directors and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income/Loss Allocation to Noncontrolling Interests – Refer to Notes 1 and 7 to the financial statements

Southern Power has entered into a number of tax equity partnership arrangements, wherein they agree to sell 100% of a class of membership interests (e.g. Class A) in an entity to a noncontrolling investor in exchange for cash contributions, while retaining control of the entity through a separate class of membership interests (e.g. Class B). The agreements for these partnerships give different rights and priorities to their owners in terms of cash distributions, tax attribute allocations, and partnership income or loss allocations. These provisions make the conventional equity method of accounting where an investor applies its "percentage ownership interest" to the investee's net income under generally accepted accounting principles to determine the investor's share of earnings or losses difficult to apply. Therefore, Southern Power uses the Hypothetical Liquidation at Book Value (HLBV) accounting method to account for these partnership arrangements. The HLBV accounting method calculates each partner's share of income or loss based on the change in net equity the partner can legally claim at the end of the reporting period compared to the beginning of the reporting period. The application of the HLBV accounting method by Southern Power required significant consideration of the allocations between Southern Power and the noncontrolling investors over the life of the agreement and the liquidation provisions of the agreement to determine the appropriate allocation of income or loss between the parties.

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The determination of the appropriate amount of allocated partnership income or loss to noncontrolling interests using the HLBV accounting method required increased audit effort and specialized skill and knowledge, including evaluation of the terms of the agreement and consideration of the appropriateness of the HLBV model based on the provisions of the agreement.

Our audit procedures included the following, among others:

We read certain agreements to understand the liquidation provisions and the provisions governing the allocation of benefits.

We evaluated certain HLBV models utilized by management to determine whether the models accurately reflect the allocation of income or loss and tax attributes in accordance with the liquidation provisions and allocation terms defined in the agreements, as well as whether the inputs in the models are accurate and complete.

We have served as Southern Power's auditor since 2002.

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	2023	2022	2021
(in millions)
Operating Revenues:
Wholesale revenues, non-affiliates	$1,597	$2,458	$1,671
Wholesale revenues, affiliates	537	875	515
Other revenues	55	36	30
Total operating revenues	2,189	3,369	2,216
Operating Expenses:
Fuel	706	1,614	802
Purchased power	116	311	139
Other operations and maintenance	473	482	423
Depreciation and amortization	504	516	517
Taxes other than income taxes	51	49	45
Loss on sales-type leases	—	1	40
Gain on dispositions, net	(20)	(2)	(41)
Total operating expenses	1,830	2,971	1,925
Operating Income	359	398	291
Other Income and (Expense):
Interest expense, net of amounts capitalized	(129)	(138)	(147)
Other income (expense), net	12	7	10
Total other income and (expense)	(117)	(131)	(137)
Earnings Before Income Taxes	242	267	154
Income taxes (benefit)	12	20	(13)
Net Income	230	247	167
Net loss attributable to noncontrolling interests	(127)	(107)	(99)
Net Income Attributable to Southern Power	$357	$354	$266

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	2023	2022	2021
(in millions)
Net Income	$230	$247	$167
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of $(1), $(30), and $(22), respectively	(3)	(91)	(67)
Reclassification adjustment for amounts included in net income, net of tax of $4, $26, and $30, respectively	11	81	89
Pension and other postretirement benefit plans:
Benefit plan net gain (loss), net of tax of $(2), $6, and $5, respectively	(7)	18	16
Reclassification adjustment for amounts included in net income, net of tax of $—, $1, and $1, respectively	—	2	2
Total other comprehensive income	1	10	40
Comprehensive loss attributable to noncontrolling interests	(127)	(107)	(99)
Comprehensive Income Attributable to Southern Power	$358	$364	$306

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	2023	2022	2021
(in millions)
Operating Activities:
Net income	$230	$247	$167
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	524	543	542
Deferred income taxes	16	9	55
Utilization of federal investment tax credits	332	49	288
Amortization of investment tax credits	(58)	(58)	(58)
Gain on dispositions, net	(20)	(2)	(41)
Loss on sales-type leases	—	1	40
Other, net	28	18	(1)
Changes in certain current assets and liabilities —
-Receivables	121	(82)	(44)
-Prepaid income taxes	2	22	(16)
-Other current assets	(24)	(11)	(14)
-Accounts payable	(60)	68	30
-Other current liabilities	5	11	3
Net cash provided from operating activities	1,096	815	951
Investing Activities:
Acquisitions, net of cash acquired	(181)	—	(345)
Property additions	(118)	(100)	(396)
Change in construction payables	21	(69)	(15)
Proceeds from dispositions	59	48	24
Payments pursuant to LTSAs	(50)	(71)	(82)
Other investing activities	4	(2)	11
Net cash used for investing activities	(265)	(194)	(803)
Financing Activities:
Increase (decrease) in notes payable, net	(83)	10	36
Proceeds — Senior notes	—	—	400
Redemptions — Senior notes	(290)	(677)	(300)
Capital contributions from parent company	18	430	8
Return of capital to parent company	—	—	(271)
Capital contributions from noncontrolling interests	21	73	501
Distributions to noncontrolling interests	(234)	(259)	(351)
Payment of common stock dividends	(252)	(198)	(204)
Other financing activities	—	(2)	(14)
Net cash used for financing activities	(820)	(623)	(195)
Net Change in Cash, Cash Equivalents, and Restricted Cash	11	(2)	(47)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year	133	135	182
Cash, Cash Equivalents, and Restricted Cash at End of Year	$144	$133	$135
Supplemental Cash Flow Information:
Cash paid (received) during the period for —
Interest (net of $3, $—, and $6 capitalized, respectively)	$122	$142	$140
Income taxes, net	(254)	(15)	(275)
Noncash transactions —
Accrued property additions at year-end	59	24	72
LTSA credits utilized from the sale of spare parts	23	—	—
Contributions from noncontrolling interests	—	15	89
Contributions of wind turbine equipment	—	—	82

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Assets	2023	2022
(in millions)
Current Assets:
Cash and cash equivalents	$124	$131
Receivables —
Customer accounts, net	136	226
Affiliated	37	51
Other	54	70
Materials and supplies	80	88
Other current assets	92	55
Total current assets	523	621
Property, Plant, and Equipment:
In service	14,690	14,658
Less: Accumulated provision for depreciation	4,119	3,661
Plant in service, net of depreciation	10,571	10,997
Construction work in progress	278	41
Total property, plant, and equipment	10,849	11,038
Other Property and Investments:
Intangible assets, net of amortization of $148 and $129, respectively	243	263
Equity investments in unconsolidated subsidiaries	—	49
Net investment in sales-type leases	148	154
Total other property and investments	391	466
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	488	489
Prepaid LTSAs	248	193
Income taxes receivable, non-current	17	19
Other deferred charges and assets	245	255
Total deferred charges and other assets	998	956
Total Assets	$12,761	$13,081

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Liabilities and Stockholders' Equity	2023	2022
(in millions)
Current Liabilities:
Securities due within one year	$—	$290
Notes payable	138	225
Accounts payable —
Affiliated	82	139
Other	91	67
Accrued taxes	26	24
Accrued interest	27	28
Operating lease obligations	29	28
Other current liabilities	97	83
Total current liabilities	490	884
Long-Term Debt	2,711	2,689
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	614	279
Accumulated deferred ITCs	1,498	1,556
Operating lease obligations, deferred	517	514
Other deferred credits and liabilities	233	243
Total deferred credits and other liabilities	2,862	2,592
Total Liabilities	6,063	6,165
Common Stockholder's Equity:
Common stock, par value $0.01 per share (Authorized - 1 million shares; Outstanding - 1,000 shares)	—	—
Paid-in capital	1,088	1,069
Retained earnings	1,846	1,741
Accumulated other comprehensive loss	(17)	(18)
Total common stockholder's equity	2,917	2,792
Noncontrolling Interests	3,781	4,124
Total Stockholders' Equity (See accompanying statements)	6,698	6,916
Total Liabilities and Stockholders' Equity	$12,761	$13,081
Commitments and Contingent Matters (See notes)

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