ALABAMA POWER CO

7. CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS

The Registrants may hold ownership interests in a number of business ventures with varying ownership structures. Partnership interests and other variable interests are evaluated to determine if each entity is a VIE. If a venture is a VIE for which a Registrant is the primary beneficiary, the assets, liabilities, and results of operations of the entity are consolidated. The Registrants reassess the conclusion as to whether an entity is a VIE upon certain occurrences, which are deemed reconsideration events.

For entities that are not determined to be VIEs, the Registrants evaluate whether they have control or significant influence over the investee to determine the appropriate consolidation and presentation. Generally, entities under the control of a Registrant are consolidated, and entities over which a Registrant can exert significant influence, but which a Registrant does not control, are accounted for under the equity method of accounting.

Investments accounted for under the equity method are recorded within equity investments in unconsolidated subsidiaries in the balance sheets and, for Southern Company and Southern Company Gas, the equity income is recorded within earnings from equity method investments in the statements of income. See "SEGCO" and "Southern Company Gas" herein for additional information.

At December 31, 2025 and 2024, Southern Holdings had equity method investments totaling $124 million and $128 million, respectively, primarily related to investments in venture capital funds focused on energy and utility investments. The net loss from these investments totaled $18 million for the year ended December 31, 2025. Earnings/losses from these investments were immaterial for the years ended December 31, 2024 and 2023.

SEGCO

Alabama Power and Georgia Power own equally all of the outstanding capital stock of SEGCO, which owns electric generating units at Plant Gaston with a total rated capacity of 1,020 MWs, as well as associated transmission facilities. Retirement of SEGCO's generating units was previously expected to occur by December 31, 2028. However, upon further analysis, Alabama Power, in conjunction with Georgia Power, now expects to operate Plant Gaston Units 1 through 4 through December 31, 2034. See Note 2 under "Georgia Power – Integrated Resource Plans – 2025 IRP" for additional information. Alabama Power and Georgia Power account for SEGCO using the equity method; Southern Company consolidates SEGCO. The capacity of these units is sold equally to Alabama Power and Georgia Power. Alabama Power and Georgia Power make payments sufficient to provide for the operating expenses, taxes, interest expense, and an ROE. The share of purchased power included in purchased power, affiliates in the statements of income totaled $130 million in 2025, $115 million in 2024, and $112 million in 2023 for Alabama Power and $133 million in 2025, $118 million in 2024, and $115 million in 2023 for Georgia Power.

SEGCO paid dividends of $24 million in 2025, $20 million in 2024, and $25 million in 2023, one half of which were paid to each of Alabama Power and Georgia Power. In addition, Alabama Power and Georgia Power each recognize 50% of SEGCO's net income.

Alabama Power, which owns and operates a generating unit adjacent to the SEGCO generating units, has a joint ownership agreement with SEGCO for the ownership of an associated gas pipeline. Alabama Power owns 14% of the pipeline with the remaining 86% owned by SEGCO.

See Note 3 under "Guarantees" for additional information regarding guarantees of Alabama Power and Georgia Power related to SEGCO.

Variable Interest Entities

Southern Power has certain subsidiaries that are determined to be VIEs. Southern Power is considered the primary beneficiary of these VIEs because it controls the most significant activities of the VIEs, including operating and maintaining the respective assets, and has the obligation to absorb expected losses of these VIEs to the extent of its equity interests.

SP Solar

SP Solar is owned by Southern Power and a limited partner. A wholly-owned subsidiary of Southern Power is the general partner and holds a 1% ownership interest, and another wholly-owned subsidiary of Southern Power owns a 66% ownership interest. The

II-168 limited partner holds the remaining 33% noncontrolling interest. SP Solar qualifies as a VIE since the arrangement is structured as a limited partnership and the 33% limited partner does not have substantive kick-out rights against the general partner.

At December 31, 2025 and 2024, SP Solar had total assets of $5.2 billion and $5.4 billion, respectively, total liabilities of $360 million and $372 million, respectively, and noncontrolling interests of $0.9 billion and $1.0 billion, respectively. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to the limited partner in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.

Southern Power consolidates SP Solar, as the primary beneficiary, since it controls the most significant activities of the entity, including operating and maintaining its assets. Certain transfers and sales of the assets in the VIE are subject to partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.

SP Wind

SP Wind was owned by Southern Power andthree financial investors through December 31, 2025. A wholly-owned subsidiary of Southern Power owned 100% of the Class B membership interests and thethree financial investors owned 100% of the Class A membership interests. In July 2025, Southern Power notified the Class A members of its intent to exercise the option to purchase all Class A membership interests in the SP Wind tax equity partnership under the terms of the limited liability agreement. On December 31, 2025, Southern Power purchased 100% of the noncontrolling Class A membership interests for approximately $282 million. Subsequent to the transaction, Southern Power became the sole owner of SP Wind and its portfolio of eight operating wind facilities, and the partnership was dissolved. See Note 15 under "Southern Power – Purchase of Renewable Facility Interests" for additional information.

Prior to this transaction, SP Wind qualified as a VIE since the structure of the arrangement was similar to a limited partnership and the Class A members did not have substantive kick-out rights against Southern Power. At December 31, 2024, SP Wind had total assets of $2.0 billion, total liabilities of $177 million, and noncontrolling interests of $35 million.

Other Variable Interest Entities

Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax equity investors or acquired less than a 100% interest from facility developers. These entities are considered VIEs because the arrangements are structured similar to a limited partnership and the noncontrolling members do not have substantive kick-out rights.

At December 31, 2025 and 2024, the other VIEs had total assets of $1.6 billion, total liabilities of $236 million and $224 million, respectively, and noncontrolling interests of $617 million and $691 million, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.

Equity Method Investments

During 2023, Southern Power sold its remaining equity method investments in wind projects and received proceeds totaling $50 million. Earnings (loss) from these investments, including the gains associated with the sales, were immaterial for 2023.

The carrying amounts of Southern Company Gas' equity method investments at December 31, 2025 and 2024 were as follows:

The earnings from Southern Company Gas' equity method investment related to SNG were $127 million in 2025, $146 million in 2024, and $139 million in 2023. The earnings from Southern Company Gas' other equity method investments were immaterial for all periods presented.

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