ALABAMA POWER CO
For the period ended Dec 31, 2025. Filed Feb 19, 2026.
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FY2025 · Filed Feb 19, 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, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, 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 Note 1 (Summary of Significant Accounting Policies – Variable Interest Entities) and Note 7 (Consolidated Entities and Equity Method Investments – Southern Power – Variable Interest Entities) 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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| 2025 | 2024 | 2023 | |
|---|---|---|---|
| (in millions) | |||
| Operating Revenues: | |||
| Wholesale revenues, non-affiliates | $1,743 | $1,606 | $1,597 |
| Wholesale revenues, affiliates | 437 | 371 | 537 |
| Other revenues | 18 | 37 | 55 |
| Total operating revenues | 2,198 | 2,014 | 2,189 |
| Operating Expenses: | |||
| Fuel | 676 | 579 | 706 |
| Purchased power | 122 | 78 | 116 |
| Other operations and maintenance | 528 | 516 | 473 |
| Depreciation and amortization | 843 | 522 | 504 |
| Taxes other than income taxes | 48 | 41 | 51 |
| Gain on dispositions, net | — | — | (20) |
| Total operating expenses | 2,217 | 1,736 | 1,830 |
| Operating Income (Loss) | (19) | 278 | 359 |
| Other Income and (Expense): | |||
| Interest expense, net of amounts capitalized | (104) | (117) | (129) |
| Other income (expense), net | 17 | 13 | 12 |
| Total other income and (expense) | (87) | (104) | (117) |
| Earnings (Loss) Before Income Taxes | (106) | 174 | 242 |
| Income taxes (benefit) | (61) | (13) | 12 |
| Net Income (Loss) | (45) | 187 | 230 |
| Net loss attributable to noncontrolling interests | (170) | (141) | (127) |
| Net Income Attributable to Southern Power | $125 | $328 | $357 |
| 2025 | 2024 | 2023 | |
|---|---|---|---|
| (in millions) | |||
| Net Income (Loss) | $(45) | $187 | $230 |
| Other comprehensive income: | |||
| Qualifying hedges: | |||
| Changes in fair value, net of tax of $14, $(10), and $(1), respectively | 43 | (31) | (3) |
| Reclassification adjustment for amounts included in net income, net of tax of $(14), $12, and $4, respectively | (45) | 39 | 11 |
| Pension and other postretirement benefit plans: | |||
| Benefit plan net gain (loss), net of tax of $1, $2, and $(2), respectively | 4 | 7 | (7) |
| Total other comprehensive income | 2 | 15 | 1 |
| Comprehensive loss attributable to noncontrolling interests | (170) | (141) | (127) |
| Comprehensive Income Attributable to Southern Power | $127 | $343 | $358 |
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| 2025 | 2024 | 2023 | |
|---|---|---|---|
| (in millions) | |||
| Operating Activities: | |||
| Net income (loss) | $(45) | $187 | $230 |
| Adjustments to reconcile net income to net cash provided from operating activities — | |||
| Depreciation and amortization, total | 866 | 537 | 524 |
| Deferred income taxes | (34) | (7) | 16 |
| Utilization of federal tax credit carryforward | (95) | 75 | 332 |
| Amortization of ITCs | (58) | (58) | (58) |
| Gain on dispositions, net | — | — | (20) |
| Other, net | 13 | 36 | 28 |
| Changes in certain current assets and liabilities — | |||
| -Receivables | 40 | (39) | 121 |
| -Other current assets | (19) | (22) | (22) |
| -Accounts payable | 7 | (3) | (60) |
| -Accrued taxes | (8) | 16 | (12) |
| -Other current liabilities | 3 | (14) | 17 |
| Net cash provided from operating activities | 670 | 708 | 1,096 |
| Investing Activities: | |||
| Acquisitions, net of cash acquired | — | — | (181) |
| Property additions | (878) | (344) | (118) |
| Change in construction payables | (1) | 35 | 21 |
| Proceeds from dispositions | — | — | 59 |
| Payments pursuant to LTSAs | (56) | (45) | (50) |
| Other investing activities | 1 | 24 | 4 |
| Net cash used for investing activities | (934) | (330) | (265) |
| Financing Activities: | |||
| Increase (decrease) in notes payable, net | 140 | (129) | (83) |
| Proceeds — Senior notes | 1,100 | — | — |
| Redemptions — Senior notes | (900) | — | (290) |
| Capital contributions from parent company | 619 | 216 | 18 |
| Capital contributions from noncontrolling interests | 23 | 11 | 21 |
| Distributions to noncontrolling interests | (200) | (185) | (234) |
| Purchase of membership interests from noncontrolling interests | (286) | — | — |
| Payment of common stock dividends | (279) | (262) | (252) |
| Other financing activities | (16) | (5) | — |
| Net cash provided from (used for) financing activities | 201 | (354) | (820) |
| Net Change in Cash, Cash Equivalents, and Restricted Cash | (63) | 24 | 11 |
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Year | 168 | 144 | 133 |
| Cash, Cash Equivalents, and Restricted Cash at End of Year | $105 | $168 | $144 |
| Supplemental Cash Flow Information: | |||
| Cash paid (received) during the period for — | |||
| Interest (net of $25, $7, and $3 capitalized, respectively) | $88 | $107 | $122 |
| Income taxes, net (excludes credit transfers) | 148 | (32) | (254) |
| Noncash transactions — | |||
| Accrued property additions at year-end | 59 | 84 | 59 |
| LTSA credits utilized from the sale of spare parts | 6 | 13 | 23 |
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| Assets | 2025 | 2024 |
|---|---|---|
| (in millions) | ||
| Current Assets: | ||
| Cash and cash equivalents | $105 | $159 |
| Receivables — | ||
| Customer accounts, net | 151 | 122 |
| Affiliated | 35 | 39 |
| Other | 16 | 90 |
| Materials and supplies | 132 | 107 |
| Other current assets | 89 | 82 |
| Total current assets | 528 | 599 |
| Property, Plant, and Equipment: | ||
| In service | 15,034 | 14,961 |
| Less: Accumulated provision for depreciation | 5,214 | 4,540 |
| Plant in service, net of depreciation | 9,820 | 10,421 |
| Construction work in progress | 1,080 | 317 |
| Total property, plant, and equipment | 10,900 | 10,738 |
| Other Property and Investments: | ||
| Intangible assets, net of amortization of $188 and $168, respectively | 203 | 223 |
| Net investment in sales-type leases | 137 | 143 |
| Total other property and investments | 340 | 366 |
| Deferred Charges and Other Assets: | ||
| Operating lease right-of-use assets, net of amortization | 479 | 484 |
| Prepaid LTSAs | 170 | 234 |
| Other deferred charges and assets | 240 | 232 |
| Total deferred charges and other assets | 889 | 950 |
| Total Assets | $12,657 | $12,653 |
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| Liabilities and Stockholders' Equity | 2025 | 2024 |
|---|---|---|
| (in millions) | ||
| Current Liabilities: | ||
| Securities due within one year | $587 | $500 |
| Notes payable | 138 | — |
| Accounts payable — | ||
| Affiliated | 88 | 80 |
| Other | 93 | 100 |
| Accrued taxes | 9 | 18 |
| Accrued interest | 38 | 26 |
| Operating lease obligations | 31 | 29 |
| Other current liabilities | 92 | 96 |
| Total current liabilities | 1,076 | 849 |
| Long-Term Debt | 2,353 | 2,180 |
| Deferred Credits and Other Liabilities: | ||
| Accumulated deferred income taxes | 579 | 712 |
| Accumulated deferred ITCs | 1,383 | 1,440 |
| Operating lease obligations, deferred | 510 | 511 |
| Other deferred credits and liabilities | 235 | 279 |
| Total deferred credits and other liabilities | 2,707 | 2,942 |
| Total Liabilities | 6,136 | 5,971 |
| Common Stockholder's Equity: | ||
| Common stock, par value $0.01 per share (Authorized - 1 million shares; Outstanding - 1,000 shares) | — | — |
| Paid-in capital | 1,912 | 1,306 |
| Retained earnings | 1,758 | 1,912 |
| Accumulated other comprehensive income (loss) | — | (2) |
| Total common stockholder's equity | 3,670 | 3,216 |
| Noncontrolling Interests | 2,851 | 3,466 |
| Total Stockholders' Equity (See accompanying statements) | 6,521 | 6,682 |
| Total Liabilities and Stockholders' Equity | $12,657 | $12,653 |
| Commitments and Contingent Matters (See notes) | ||
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