GEORGIA POWER CO
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 31, 2024
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Fair Value Measurements
(I)FAIR VALUE MEASUREMENTS
At September 30, 2024, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:
| Fair Value Measurements Using: | |||||
|---|---|---|---|---|---|
| At September 30, 2024 | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) | SignificantOtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Net Asset Value as a Practical Expedient (NAV) | Total |
| (in millions) | |||||
| Southern Company | |||||
| Assets: | |||||
| Energy-related derivatives(a) | $8 | $59 | $— | $— | $67 |
| Interest rate derivatives | — | 1 | — | — | 1 |
| Investments in trusts:(b) | |||||
| Domestic equity | 843 | 255 | — | — | 1,098 |
| Foreign equity | 163 | 189 | — | — | 352 |
| U.S. Treasury and government agency securities | — | 368 | — | — | 368 |
| Municipal bonds | — | 50 | — | — | 50 |
| Pooled funds – fixed income | — | 7 | — | — | 7 |
| Corporate bonds | — | 464 | — | — | 464 |
| Mortgage and asset backed securities | — | 106 | — | — | 106 |
| Private equity | — | — | — | 179 | 179 |
| Cash and cash equivalents | 1 | — | — | — | 1 |
| Other | 28 | 3 | — | 9 | 40 |
| Cash equivalents and restricted cash | 336 | 16 | — | — | 352 |
| Other investments | 9 | 28 | 8 | — | 45 |
| Total | $1,388 | $1,546 | $8 | $188 | $3,130 |
| Liabilities: | |||||
| Energy-related derivatives(a) | $13 | $189 | $— | $— | $202 |
| Interest rate derivatives | — | 218 | — | — | 218 |
| Foreign currency derivatives | — | 105 | — | — | 105 |
| Contingent consideration | 3 | — | 17 | — | 20 |
| Other | — | 13 | 9 | — | 22 |
| Total | $16 | $525 | $26 | $— | $567 |
| Fair Value Measurements Using: | |||||
|---|---|---|---|---|---|
| At September 30, 2024 | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) | SignificantOtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Net Asset Value as a Practical Expedient (NAV) | Total |
| (in millions) | |||||
| Alabama Power | |||||
| Assets: | |||||
| Energy-related derivatives | $— | $21 | $— | $— | $21 |
| Nuclear decommissioning trusts:(b) | |||||
| Domestic equity | 460 | 246 | — | — | 706 |
| Foreign equity | 163 | — | — | — | 163 |
| U.S. Treasury and government agency securities | — | 18 | — | — | 18 |
| Municipal bonds | — | 1 | — | — | 1 |
| Corporate bonds | — | 286 | — | — | 286 |
| Mortgage and asset backed securities | — | 29 | — | — | 29 |
| Private equity | — | — | — | 179 | 179 |
| Other | 5 | 1 | — | 9 | 15 |
| Cash equivalents and restricted cash | 197 | 16 | — | — | 213 |
| Other investments | — | 28 | — | — | 28 |
| Total | $825 | $646 | $— | $188 | $1,659 |
| Liabilities: | |||||
| Energy-related derivatives | $— | $65 | $— | $— | $65 |
| Georgia Power | |||||
| Assets: | |||||
| Energy-related derivatives | $— | $13 | $— | $— | $13 |
| Interest rate derivatives | — | 1 | — | — | 1 |
| Nuclear decommissioning trusts:(b) | |||||
| Domestic equity | 383 | 1 | — | — | 384 |
| Foreign equity | — | 188 | — | — | 188 |
| U.S. Treasury and government agency securities | — | 350 | — | — | 350 |
| Municipal bonds | — | 49 | — | — | 49 |
| Corporate bonds | — | 178 | — | — | 178 |
| Mortgage and asset backed securities | — | 77 | — | — | 77 |
| Other | 23 | 2 | — | — | 25 |
| Total | $406 | $859 | $— | $— | $1,265 |
| Liabilities: | |||||
| Energy-related derivatives | $— | $65 | $— | $— | $65 |
| Fair Value Measurements Using: | |||||
|---|---|---|---|---|---|
| At September 30, 2024 | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) | SignificantOtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Net Asset Value as a Practical Expedient (NAV) | Total |
| (in millions) | |||||
| Mississippi Power | |||||
| Assets: | |||||
| Energy-related derivatives | $— | $14 | $— | $— | $14 |
| Liabilities: | |||||
| Energy-related derivatives | $— | $51 | $— | $— | $51 |
| Southern Power | |||||
| Assets: | |||||
| Energy-related derivatives | $— | $4 | $— | $— | $4 |
| Liabilities: | |||||
| Energy-related derivatives | $— | $2 | $— | $— | $2 |
| Foreign currency derivatives | — | 15 | — | — | 15 |
| Contingent consideration | 3 | — | 17 | — | 20 |
| Other | — | 13 | 9 | — | 22 |
| Total | $3 | $30 | $26 | $— | $59 |
| Southern Company Gas | |||||
| Assets: | |||||
| Energy-related derivatives(a) | $8 | $7 | $— | $— | $15 |
| Non-qualified deferred compensation trusts: | |||||
| Domestic equity | — | 8 | — | — | 8 |
| Foreign equity | — | 1 | — | — | 1 |
| Pooled funds – fixed income | — | 7 | — | — | 7 |
| Cash and cash equivalents | 1 | — | — | — | 1 |
| Cash equivalents | 10 | — | — | — | 10 |
| Total | $19 | $23 | $— | $— | $42 |
| Liabilities: | |||||
| Energy-related derivatives(a) | $13 | $6 | $— | $— | $19 |
| Interest rate derivatives | — | 62 | — | — | 62 |
| Total | $13 | $68 | $— | $— | $81 |
(a)Excludes cash collateral of $22 million.
(b)Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds, including reinvested interest and dividends and excluding the funds' expenses, increased (decreased) by the amounts shown in the table below for the three and nine months ended September 30, 2024 and 2023. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| Fair value increases (decreases) | 2024 | 2023 | 2024 | 2023 |
| (in millions) | ||||
| Southern Company | $97 | $(4) | $230 | $211 |
| Alabama Power | 67 | (36) | 153 | 54 |
| Georgia Power | 30 | 32 | 77 | 157 |
Valuation Methodologies
The energy-related derivatives primarily consist of exchange-traded and over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note (J) for additional information on how these derivatives are used.
For fair value measurements of the investments within the nuclear decommissioning trusts and the non-qualified deferred compensation trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available.
The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. See Note 6 to the financial statements under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.
Southern Power has contingent payment obligations related to two of its acquisitions whereby it is primarily obligated to make generation-based payments to the seller, commencing at the commercial operation of each facility and continuing through 2026 and 2036, respectively. The obligations are primarily categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility's generation in MW-hours, as well as other inputs such as a fixed dollar amount per MW-hour, and a discount rate. The fair value of the obligations reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.
Southern Power also has payment obligations through 2040 whereby it must reimburse the transmission owners for interconnection facilities and network upgrades constructed to support connection of a Southern Power generating facility to the transmission system. The obligations are categorized as Level 2 under Fair Value Measurements as the fair value is determined using observable inputs for the contracted amounts and reimbursement period, as well as a discount rate. The fair value of the obligations reflects the net present value of expected payments.
"Other investments" primarily includes investments traded in the open market that have maturities greater than 90 days, which are categorized as Level 2 under Fair Value Measurements and are comprised of corporate bonds, bank certificates of deposit, treasury bonds, and/or agency bonds.
At September 30, 2024, the fair value measurements of private market investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $188 million and unfunded commitments related to the private market investments totaled $89 million. Private market investments include high-quality private equity funds across several market sectors, funds that invest in real estate assets, and a private credit fund. Private market funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.
At September 30, 2024, other financial instruments for which the carrying amount did not equal fair value were as follows:
| SouthernCompany(*) | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas(*) | |
|---|---|---|---|---|---|---|
| (in billions) | ||||||
| Long-term debt, including securities due within one year: | ||||||
| Carrying amount | $62.6 | $11.2 | $17.4 | $1.7 | $2.7 | $8.4 |
| Fair value | 59.8 | 10.3 | 16.3 | 1.5 | 2.7 | 7.7 |
(*)The carrying amount of Southern Company Gas' long-term debt includes fair value adjustments from the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the remaining lives of the respective bonds, the latest being through 2043.
The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the Registrants.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.