ALABAMA POWER CO

Overview

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY– "Overview" in Item 7 of the Form 10-K for additional information. The financial condition of each Registrant remained stable at June 30, 2025. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See "Cash Requirements," "Sources of Capital," and "Financing Activities" herein for additional information.

At the end of the second quarter 2025, the market price of Southern Company's common stock was $91.83 per share (based on the closing price as reported on the NYSE) and the book value was $30.92 per share, representing a market-to-book ratio of 297%, compared to $82.32, $30.28, and 272%, respectively, at the end of 2024. Southern Company's common stock dividend for the second quarter 2025 was $0.74 per share compared to $0.72 per share in the second quarter 2024.

Cash Requirements

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" in Item 7 of the Form 10-K for a description of the Registrants' significant cash requirements.

The Registrants' significant cash requirements include estimated capital expenditures associated with their construction programs. The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation, regulation, and/or tariff policy; the cost, availability, and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to judicial or regulatory action; storm impacts; and the cost of capital. In addition, with respect to the traditional electric operating companies and the natural gas distribution utilities, there can be no assurance that any costs related to capital expenditures and AROs will be fully recovered. Additionally, expenditures associated with Southern Power's planned acquisitions may vary due to market opportunities and the execution of its growth strategy.

In June and July 2025, Georgia Power requested certification from the Georgia PSC for several Georgia Power-owned projects through various RFPs. Estimated capital expenditures associated with these projects and related transmission investments through 2029 total approximately $14.3 billion, excluding previously committed expenditures and AFUDC. See Note (B) to the Condensed Financial Statements under "Georgia Power – Integrated Resource Plans" for additional information.

During the second quarter 2025, Southern Power committed to development projects to repower the Grant Plains, Grant Wind, and Wake Wind facilities. The remaining aggregate construction costs for these projects are expected to be between $715 million and $805 million. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

Long-term debt maturities and the interest payable on long-term debt each represent a significant cash requirement for the Registrants. See "Financing Activities" herein for information on changes in the Registrants' long-term debt balances since December 31, 2024.

Sources of Capital

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt, hybrid, and/or equity issuances. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings.

The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. Operating cash flows provide a substantial portion of the Registrants' cash needs.

The amount, type, and timing of any financings in 2025, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals (for certain of the Subsidiary Registrants), and other factors. See "Cash Requirements" and "Financing Activities" herein for additional information.

By regulation, Nicor Gas is restricted, up to its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At June 30, 2025, the amount of subsidiary retained earnings restricted to dividend totaled $1.8 billion. This restriction did not impact Southern Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.

Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at June 30, 2025 for the applicable Registrants:

The Registrants believe the need for working capital can be adequately met by utilizing operating cash flows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the Subsidiary Registrants may utilize equity contributions and/or loans from Southern Company.

Bank Credit Arrangements

At June 30, 2025, unused committed credit arrangements with banks were as follows:

(a)Includes $14 million at Alabama Property Company, a wholly-owned subsidiary of Alabama Power. Alabama Power is not party to this arrangement.

(b)At June 30, 2025, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $21 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(c)Includes $798 million and $800 million at Southern Company Gas Capital and Nicor Gas, respectively.

Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.

A portion of the unused credit with banks is allocated to provide liquidity support to certain revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. At June 30, 2025, outstanding variable rate demand revenue bonds of the traditional electric operating companies with allocated liquidity support totaled approximately $1.5 billion (comprised of approximately $796 million at Alabama Power, $667 million at Georgia Power, and $69 million at Mississippi Power). Subsequent to June 30, 2025, Mississippi Power repaid at maturity approximately $11 million of its $69 million variable rate demand revenue bonds. In addition, at June 30, 2025, Alabama Power and Georgia Power had approximately $280 million and $501 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months. Alabama Power's $280 million of fixed rate revenue bonds are classified as securities due within one year on its balance sheets as they are not covered by long-term committed credit. All other variable rate demand revenue bonds and fixed rate revenue bonds required to be remarketed within the next 12 months are classified as long-term debt on the balance sheets as a result of available long-term committed credit.

See Note 8 to the financial statements in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.

Short-term Borrowings

The Registrants, Nicor Gas, and SEGCO make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described above. Southern Power's subsidiaries are not issuers or obligors under its commercial paper program. Commercial paper and short- term bank term loans are included in notes payable in the balance sheets. Details of the Registrants' short-term borrowings were as follows:

(*)Average and maximum amounts are based upon daily balances during the three-month period ended June 30, 2025.

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 are presented in the following table:

Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.

Net cash provided from operating activities decreased $568 million for the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to the timing of vendor payments, decreased retail fuel cost recovery, primarily at Alabama Power, and storm restoration costs at Georgia Power, partially offset by the timing of materials and supplies purchases. See Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information relating to storm restoration costs.

The net cash used for investing activities for the six months ended June 30, 2025 was primarily related to the Subsidiary Registrants' construction programs.

The net cash provided from financing activities for the six months ended June 30, 2025 was primarily related to net issuances of long-term debt, partially offset by common stock dividend payments.

Net cash provided from operating activities decreased $199 million for the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to a decrease in fuel cost recovery and customer refunds associated with the nuclear fuel disposal cost award, partially offset by the timing of vendor payments. See Note 3 to the financial statements under "Nuclear Fuel Disposal Cost" in Item 8 of the Form 10-K for additional information.

The net cash used for investing activities for the six months ended June 30, 2025 was primarily related to gross property additions.

The net cash provided from financing activities for the six months ended June 30, 2025 was primarily related to capital contributions from Southern Company and net issuances of senior notes, partially offset by common stock dividend payments.

Net cash provided from operating activities decreased $345 million for the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to the timing of vendor payments and storm restoration costs, partially offset by the timing of customer receivable collections. See Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information relating to storm restoration costs.

The net cash used for investing activities for the six months ended June 30, 2025 was primarily related to gross property additions.

The net cash provided from financing activities for the six months ended June 30, 2025 was primarily related to capital contributions from Southern Company and net issuances of senior notes, partially offset by common stock dividend payments.

Net cash provided from operating activities decreased $7 million for the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to decreased fuel cost recovery, partially offset by the timing of fossil fuel stock purchases.

The net cash used for investing activities for the six months ended June 30, 2025 was primarily related to gross property additions, partially offset by contributions in aid of construction.

The net cash provided from financing activities for the six months ended June 30, 2025 was primarily related to issuances of senior notes and capital contributions from Southern Company, partially offset by common stock dividend payments.

Net cash provided from operating activities increased $2 million for the six months ended June 30, 2025 as compared to the corresponding period in 2024.

The net cash used for investing activities for the six months ended June 30, 2025 was primarily related to ongoing construction activities. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

The net cash provided from financing activities for the six months ended June 30, 2025 was primarily related to an increase in commercial paper borrowings and capital contributions from Southern Company, partially offset by common stock dividend payments and net distributions to noncontrolling interests.

Net cash provided from operating activities decreased $60 million for the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to the timing of customer receivable collections.

The net cash used for investing activities for the six months ended June 30, 2025 was primarily related to construction of transportation and distribution assets recovered through base rates.

The net cash used for financing activities for the six months ended June 30, 2025 was primarily related to common stock dividend payments.

Significant Balance Sheet Changes

•an increase of $4.9 billion in long-term debt (including securities due within one year) primarily related to issuances of senior notes and junior subordinated notes, partially offset by repayment of senior notes;

•an increase of $3.5 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;

•a decrease of $753 million in accounts payable primarily related to the timing of vendor payments;

•an increase of $668 million in total stockholders' equity primarily related to net income, partially offset by common stock dividend payments;

•an increase of $564 million in accumulated deferred income taxes primarily related to property-related timing differences and monetization of tax credits in 2025;

•a decrease of $436 million in accrued compensation due to the timing of payments;

•decreases of $389 million and $307 million in AROs and regulatory assets associated with AROs, respectively, primarily related to cost estimate updates at Alabama Power; and

•a decrease of $350 million in notes payable primarily due to repayment of short-term bank debt and a reduction in commercial paper borrowings.

See "Financing Activities" and Note (A) to the Condensed Financial Statements under "Asset Retirement Obligations" herein for additional information.

•an increase of $712 million in common stockholder's equity primarily due to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;

•an increase of $367 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities;

•an increase of $351 million in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;

•decreases of $305 million and $218 million in AROs and regulatory assets associated with AROs, respectively, primarily related to cost estimate updates;

•a decrease of $228 million in other accounts payable primarily due to the timing of vendor payments; and

•a decrease of $191 million in cash and cash equivalents, as reflected in the statements of cash flows and discussed further under "Analysis of Cash Flows – Alabama Power" herein.

See "Financing Activities – Alabama Power" and Note (A) to the Condensed Financial Statements under "Asset Retirement Obligations" herein for additional information.

•an increase of $2.4 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including costs associated with Plant Yates Units 8, 9, and 10;

•an increase of $1.8 billion in common stockholder's equity primarily due to capital contributions from Southern Company and net income, partially offset by dividends paid to Southern Company;

•an increase of $1.3 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;

•a decrease of $522 million in accounts payable primarily related to timing of vendor payments;

•an increase of $286 million in accumulated deferred income taxes primarily related to increases in property-related timing differences and a valuation allowance on certain state tax credit carryforwards, partially offset by decreases for timing differences in fuel recovery and customer advances; and

•a decrease of $234 million in accrued taxes primarily due to payments for municipal franchise fees and property taxes.

See "Financing Activities – Georgia Power" and Notes (B) and (G) to the Condensed Financial Statements under "Georgia Power – Other Construction" and "Georgia Power," respectively, herein for additional information.

•an increase of $99 million in long-term debt (including securities due within one year) primarily due to issuances of senior notes;

•an increase of $83 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities;

•an increase of $75 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;

•an increase of $53 million in other deferred credits and liabilities primarily due to contributions in aid of construction; and

•a decrease of $49 million in accrued taxes is primarily due to the payment of ad valorem taxes.

See "Financing Activities – Mississippi Power" herein for additional information.

•an increase of $200 million in notes payable due to an increase in commercial paper borrowings;

•an increase of $136 million in total property, plant, and equipment due to an increase in CWIP primarily related to the continued construction of the Millers Branch solar facility and wind repowering projects, partially offset by the continued depreciation of assets;

•an increase of $67 million in long-term debt (including securities due within one year) primarily due to the change in fair value related to the foreign currency hedge on euro-denominated senior notes; and

•an increase of $62 million in customer accounts receivable, net primarily related to the timing of customer receivables.

See Notes (I) and (J) to the Condensed Financial Statements and Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

•an increase of $446 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets;

•a decrease of $208 million in total accounts receivable primarily related to seasonality;

•an increase of $202 million in common stockholder's equity primarily related to net income, partially offset by dividends paid to Southern Company;

•a decrease of $191 million in natural gas for sale due to higher volumes of natural gas sold; and

•an increase of $182 million in cash and cash equivalents, as reflected in the statements of cash flows and discussed further under "Analysis of Cash Flows –Southern Company Gas" herein.

Financing Activities

The following table outlines long-term debt financing activities for the first six months of 2025:

(a)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $43 million for FFB borrowings. See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information.

(b)Includes repayment by SEGCO of $10 million of its $100 million principal amount long-term bank loan due November 15, 2025, which is guaranteed by Alabama Power. At June 30, 2025, $70 million of the long-term bank loan remains outstanding. See Note 3 to the financial statements under "Guarantees" in Item 8 of the Form 10-K for additional information.

(c)Represents reductions in affiliate finance lease obligations at Georgia Power, which are eliminated in Southern Company's consolidated financial statements.

Except as otherwise described herein, the Registrants used the proceeds of debt issuances for their redemptions and maturities shown in the table above, to repay short-term indebtedness, and for general corporate purposes, including working capital. The Subsidiary Registrants also used the proceeds for their construction programs.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, the Registrants plan to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

During the first six months of 2025, Southern Company issued approximately 3.4 million shares of common stock primarily through employee equity compensation and savings plans. Also during the first six months of 2025, Southern Company entered into forward sale contracts for the issuance of shares of common stock that may be settled through December 2026. See Note (F) to the Condensed Financial Statements under "Equity Distribution Agreement" herein for additional information.

In January 2025, Southern Company issued $565 million aggregate principal amount of Series 2025A 6.50% Junior Subordinated Notes due March 15, 2085.

In February 2025, Southern Company issued $1.8 billion aggregate principal amount of Series 2025B 6.375% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due March 15, 2055.

In May 2025, Southern Company issued $1.65 billion aggregate principal amount of Series 2025A 3.25% Convertible Senior Notes due June 15, 2028 in a private offering. Southern Company used a portion of the proceeds from this issuance to repurchase approximately $781.6 million of the $1.725 billion aggregate principal amount outstanding of its Series 2023A 3.875% Convertible Senior Notes due December 15, 2025 and approximately $328.1 million of the $1.5 billion aggregate principal amount outstanding of its Series 2024A 4.50% Convertible Senior Notes due June 15, 2027. See Note (F) to the Condensed Financial Statements under "Convertible Senior Notes" herein for additional information.

In March 2025, Alabama Power issued $500 million aggregate principal amount of Series 2025A 5.10% Senior Notes due April 2, 2035.

In April 2025, Alabama Power repaid at maturity $250 million aggregate principal amount of its Series 2015B 2.80% Senior Notes.

In June 2025, Alabama Power issued $100 million aggregate principal amount of Series 2025B Floating Rate Senior Notes due August 15, 2075.

In March 2025, Georgia Power issued $400 million aggregate principal amount of Series 2025A Floating Rate Senior Notes due September 15, 2026, $500 million aggregate principal amount of Series 2025B 4.85% Senior Notes due March 15, 2031, and $700 million aggregate principal amount of Series 2025C 5.20% Senior Notes due March 15, 2035.

In May 2025, Georgia Power repaid at maturity $700 million aggregate principal amount of its Series 2023C Floating Rate Senior Notes.

Also in May 2025, Georgia Power entered into a $200 million short-term floating rate bank loan bearing interest based on term SOFR.

In June 2025, Georgia Power extended both of its short-term floating rate bank loans totaling $400 million to long-term term loans, which mature in June 2026.

Subsequent to June 30, 2025, Georgia Power repaid at maturity its obligations with respect to $45 million aggregate principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), First Series 1995.

In March 2025, Mississippi Power issued $50 million aggregate principal amount of Series 2025A 5.01% Senior Notes due March 15, 2030 and $50 million aggregate principal amount of Series 2025B 6.03% Senior Notes due March 15, 2055.

Subsequent to June 30, 2025, Mississippi Power repaid at maturity its obligations with respect to approximately $11 million aggregate principal amount of Mississippi Business Finance Corporation Solid Waste Disposal Facilities Revenue Bonds, Series 1995 (Mississippi Power Company Project).

Credit Rating Risk

At June 30, 2025, the Registrants did not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.

There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change of certain Registrants to BBB and/or Baa2 or below. These contracts are primarily for physical electricity and natural gas purchases and sales, fuel purchases, fuel transportation and storage, energy price risk management, transmission, interest rate management, and equipment purchases related to construction of facilities.

The maximum potential collateral requirements under these contracts at June 30, 2025 were as follows:

(*)Southern Power has PPAs that could require collateral, but not accelerated payment, in the event of a downgrade of Southern Power's credit. The PPAs require credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses resulting from a credit downgrade. Southern Power had $106 million of cash collateral posted related to PPA requirements at June 30, 2025.

The amounts in the previous table for the traditional electric operating companies and Southern Power include certain agreements that could require collateral if either Alabama Power or Georgia Power has a credit rating change to below investment grade. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Additionally, a credit rating downgrade could impact the ability of the Registrants to access capital markets and would be likely to impact the cost at which they do so.