ALABAMA POWER CO

9. LEASES

Lessee

The Registrants recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease.

As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

(*)Amounts related to affiliate leases are eliminated in consolidation for Southern Company. See "Contracts that Contain a Lease" herein for additional information.

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial

II-180 real estate leases have remaining terms of up to 18 years while the land leases have remaining terms of up to 41 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have remaining terms of up to 15 years.

Renewal options exist in many of the leases. The expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease unless it is considered reasonably certain that the lease will be extended. Land leases associated with renewable energy facilities at Southern Power and communication tower leases for automated meter infrastructure at Nicor Gas include renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities and the automated meter infrastructure, respectively.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between three and 22 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $782 million and $893 million at December 31, 2025 and 2024, respectively. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as reviewed and approved by both the Georgia PSC and the FERC. Amounts related to the affiliate PPAs are eliminated in consolidation for Southern Company.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees existed primarily in railcar leases at Alabama Power and Georgia Power. The remaining railcar leases containing residual value guarantees expired in 2023 for Alabama Power and in June 2024 for Georgia Power. The amounts probable of being paid under those guarantees were included in the lease payments, and all such amounts were immaterial at December 31, 2024.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the ROU asset.

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Balance sheet amounts recorded for operating and finance leases were as follows:

(*)Includes operating lease obligations related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $486 million, $53 million, and $1.1 billion, respectively, at December 31, 2025 and $567 million, $55 million, and $1.3 billion, respectively, at December 31, 2024.

If not presented separately on the Registrants' balance sheets, amounts related to leases are presented as follows: operating lease ROU assets, net are included in "other deferred charges and assets"; operating lease obligations are included in "other current liabilities" and "other deferred credits and liabilities," as applicable; finance lease ROU assets, net are included in "plant in service"; and finance lease obligations are included in "securities due within one year" and "long-term debt," as applicable.

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Lease costs for 2025, 2024, and 2023, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, were as follows:

(*)Includes operating lease costs related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $113 million, $5 million, and $222 million, respectively, in 2025, $108 million, $5 million, and $168 million, respectively, in 2024, and $112 million, $4 million, and $174 million, respectively, in 2023.

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs, including $49 million, $45 million, and $42 million in 2025, 2024, and 2023, respectively, from finance leases which are included in purchased power on Georgia Power's statements of income, of which $23 million, $22 million, and $21 million was included in purchased power, affiliates in 2025, 2024, and 2023, respectively.

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Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows: