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, 2026. 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 2026, the market price of Southern Company's common stock was $95.71 per share (based on the closing price as reported on the NYSE) and the book value was $34.40 per share, representing a market-to-book ratio of 278%, compared to $87.20, $32.18, and 271%, respectively, at the end of 2025. Southern Company's common stock dividend for the second quarter 2026 was $0.76 per share compared to $0.74 per share in the second quarter 2025.

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 or extending the retirement dates of certain generating plants, 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 public or political considerations or 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 the first quarter 2026, Southern Power committed to development projects to upgrade certain turbines at the Franklin and Wansley natural gas facilities. The remaining aggregate construction costs for these projects are expected to be between $580 million and $645 million. See Note (K) to the Condensed Financial Statements under "Southern Power – Natural Gas Turbine Upgrade Projects" herein for additional information regarding Southern Power's construction projects.

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, 2025.

Fuel and purchased power costs represent a significant component of funding ongoing operations for the traditional electric operating companies and Southern Power. Fuel costs include purchases of coal (for the traditional electric operating companies) and natural gas (for the traditional electric operating companies and Southern Power), as well as the related transportation and storage. Since December 31, 2025, Alabama Power and Georgia Power have entered into additional commitments for natural gas primarily related to Alabama Power's conversion of Plant Barry Unit 5 from coal to natural gas and Georgia Power's ongoing construction of generation projects. Total estimated costs for these additional fuel commitments at June 30, 2026 are provided in the table below. See Note (B) to the Condensed Financial Statements under "Georgia Power – Construction" herein and Note 2 to the financial statements under "Alabama Power – Environmental Accounting Order" in Item 8 of the Form 10-K for additional information.

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. In addition, Alabama Power and Georgia Power plan to utilize borrowings from the FFB. Operating cash flows provide a substantial portion of the Registrants' cash needs. See Note (F) to the Condensed Financial Statements under "DOE Loan Guarantee Borrowings" herein for additional information.

The amount, type, and timing of any financings in 2026, 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, 2026, the amount of subsidiary retained earnings restricted to dividend totaled $2.0 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, 2026 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, 2026, unused committed credit arrangements with banks were as follows:

(a)Includes $15 million at Alabama Property Company, a wholly-owned subsidiary of Alabama Power. Alabama Power is not party to this arrangement.

(b)Georgia Power had $26 million of letters of credit outstanding under an uncommitted letter of credit facility at June 30, 2026.

(c)At June 30, 2026, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $21 million was unused. In addition, Southern Power Company had $23 million of letters of credit outstanding under an uncommitted letter of credit facility at June 30, 2026. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(d)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, 2026, 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 $58 million at Mississippi Power). In addition, at June 30, 2026, Georgia Power had approximately $210 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months. 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 under "Bank Credit Arrangements" herein 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, 2026.

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the six months ended June 30, 2026 and 2025 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 increased $849 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to higher net income after non-cash adjustments, the timing of vendor payments and customer receivable collections, and customer refunds in 2025 associated with a nuclear fuel disposal cost award at Alabama Power, partially offset by the timing of materials and supplies purchases. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" 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, 2026 was primarily related to the Subsidiary Registrants' construction programs.

The net cash provided from financing activities for the six months ended June 30, 2026 was primarily related to issuances of common stock through the settlement of forward sale contracts, net issuances of long-term debt, and an increase in notes payable, partially offset by common stock dividend payments. See Note (F) to the Condensed Financial Statements under "Equity Distribution Agreement" herein for additional information.

Net cash provided from operating activities increased $400 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to customer refunds in 2025 associated with a nuclear fuel disposal cost award, timing of accounts receivables collections, and monetization of §45U PTCs in 2025. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" 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, 2026 was primarily related to gross property additions, partially offset by contributions in aid of construction.

The net cash used for finan cing activities for the six months ended June 30, 2026 was primarily related tocommon stock dividend payments, partially offset by capital contributions from Southern Company.

Net cash provided from operating activities increased $242 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to the timing of vendor payments, partially offset by the timing of materials and supplies purchases.

The net cash used for investing activities for the six months ended June 30, 2026 was primarily related to gross property additions.

The net cash provided from financing activities for the six months ended June 30, 2026 was primarily related to capital contributions from Southern Company, net issuances of senior notes, and net borrowings from the FFB, partially offset by common stock dividend payments and the repayment of bank loans. See Note (F) to the Condensed Financial Statements under "DOE Loan Guarantee Borrowings" herein for additional information.

Net cash provided from operating activities increased $15 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to increased fuel cost recovery and the timing of customer receivable collections, partially offset by the timing of fossil fuel stock purchases.

The net cash used for investing activities for the six months ended June 30, 2026 was primarily related to gross property additions.

The net cash provided from financing activities for the six months ended June 30, 2026 was primarily related to capital contributions from Southern Company, the issuance of senior notes, and an increase in commercial paper borrowings, partially offset by common stock dividend payments.

Net cash provided from operating activities increased $217 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to an increase in the utilization of federal tax credit carryforwards, an increase in wholesale revenues driven by higher market prices of energy, and the timing of customer receivable collections.

The net cash used for investing activities for the six months ended June 30, 2026 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, 2026 was primarily related to an issuance of senior notes and capital contributions from Southern Company, partially offset by the repayment of senior notes at maturity, common stock dividend payments, a reduction in commercial paper borrowings, and net distributions to noncontrolling interests.

Net cash provided from operating activities increased $298 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to increased customer billings, the timing of customer receivable collections, and higher natural gas cost recovery as a result of higher natural gas prices, partially offset by higher volumes of natural gas purchases and the timing of payments for natural gas.

The net cash used for investing activities for the six months ended June 30, 2026 was primarily related to construction of transmission and distribution assets recovered through base rates.

The net cash used for financing activities for the six months ended June 30, 2026 was primarily related to maturities of long-term debt, common stock dividend payments, and a reduction in commercial paper borrowings, partially offset by the issuance of junior subordinated notes.

Significant Balance Sheet Changes

•an increase of $4.0 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;

•an increase of $3.5 billion in total stockholders' equity primarily related to issuances of common stock largely through the settlement of forward sale contracts and net income, partially offset by common stock dividend payments;

•an increase of $1.6 billion in long-term debt (including securities due within one year) primarily due to net issuances of junior subordinated notes and senior notes and borrowings from the FFB, partially offset by the repayment of bank loans;

•an increase of $1.4 billion in notes payable primarily due to an increase in commercial paper borrowings; and

•an increase of $1.3 billion in cash and cash equivalents, as reflected in the statements of cash flows and discussed further under "Analysis of Cash Flows – Southern Company" herein.

See "Financing Activities" and Note (F) to the Condensed Financial Statements under "Equity Distribution Agreement" and "DOE Loan Guarantee Borrowings" herein for additional information.

•an increase of $537 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 $261 million in other deferred credits and liabilities primarily due to contributions in aid of construction funds to be used for the construction of generation, transmission, and distribution facilities; and

•an increase of $255 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities.

•an increase of $4.8 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities;

•an increase of $2.9 billion in long-term debt (including securities due within one year) primarily due to net borrowings from the FFB and net issuances of senior notes, partially offset by the repayment of bank loans; and

•an increase of $2.6 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.

See "Financing Activities – Georgia Power" and Notes (B) and (F) to the Condensed Financial Statements under "Georgia Power – Construction" and "DOE Loan Guarantee Borrowings," respectively, herein for additional information.

•an increase of $113 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 $75 million in long-term debt (including securities due within one year) primarily due to the issuance of senior notes;

•a decrease of $55 million in accrued taxes primarily due to the payment of ad valorem taxes;

•a decrease of $40 million in other deferred credits and liabilities primarily due to contributions in aid of construction funds used for the construction of transmission and distribution facilities; and

•an increase of $38 million in notes payable primarily due to an increase in commercial paper borrowings.

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

•an increase of $221 million in total stockholders' equity primarily due to capital contributions from Southern Company, partially offset by dividends paid to Southern Company, net distributions to noncontrolling interests, and net loss;

•a decrease of $181 million in total property, plant, and equipment primarily due to the continued depreciation of assets, partially offset by the continued construction of the wind repowering and the natural gas turbine upgrade projects;

•an increase of $173 million in cash and cash equivalents, as reflected in the statements of cash flows and discussed further under "Analysis of Cash Flows – Southern Power" herein; and

•a decrease of $138 million in notes payable due to a reduction in commercial paper borrowings.

See Note (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power – Purchase of Renewable Facility Interests" in Item 8 of the Form 10-K for additional information.

•an increase of $518 million in total property, plant, and equipment primarily due to the construction of transmission and distribution assets;

•a decrease of $416 million in total accounts receivable primarily due to lower customer billings resulting from lower natural gas volumes and prices, partially offset by base rate increases;

•an increase of $314 million in common stockholder's equity primarily due to net income, partially offset by dividends paid to Southern Company;

•an increase of $199 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;

•a decrease of $198 million in natural gas for sale primarily due to seasonality; and

•a decrease of $190 million in notes payable due to a reduction in commercial paper borrowings.

Financing Activities

The following table outlines long-term debt financing activities for the first six months of 2026:

(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)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 2026, Southern Company issued approximately 31.1 million shares of common stock primarily through forward sale contract settlements and employee equity compensation plans. Proceeds from settlements of the forward sale contracts totaled approximately $2.5 billion. Also during the first six months of 2026, Southern Company entered into additional forward sale contracts for the issuance of shares of common stock that may be settled through June 2028. See Note (F) to the Condensed Financial Statements under "Equity Distribution Agreement" herein for additional information.

In January 2026, Southern Company redeemed all $1.25 billion aggregate principal amount of its Series 2020B 4.00% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due January 15, 2051.

In January 2026, Southern Company borrowed $100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a floating rate, which was repaid in June 2026.

In March 2026, Southern Company issued $1.3 billion aggregate principal amount of Series 2026A 6.00% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due April 1, 2058.

Subsequent to June 30, 2026, Southern Company repaid at maturity $1.75 billion aggregate principal amount of its Series 2016E 3.25% Senior Notes.

Also subsequent to June 30, 2026, Southern Company borrowed $200 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a floating rate.

In March 2026, Alabama Power repaid at maturity its three bank term loan agreements with an aggregate principal amount of $45 million.

In February 2026, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement which is payable on demand, following specified notice by the bank, and bears interest at a rate agreed upon by Georgia Power and the bank from time to time. In March 2026, April 2026, and May 2026, Georgia Power repaid the short-term uncommitted bank credit arrangement in installments of $50 million, $50 million, and $150 million, respectively.

In March 2026, Georgia Power made initial borrowings under a multi-advance term loan facility with the FFB in an aggregate principal amount of approximately $1.0 billion at an interest rate of 5.041% through the final maturity date of December 10, 2055. The proceeds were used to reimburse Georgia Power for eligible costs relating to certain generation, battery energy storage, and transmission facilities. See Note (F) to the Condensed Financial Statements under "DOE Loan Guarantee Borrowings" herein for additional information.

In April 2026, Georgia Power repaid at maturity $325 million aggregate principal amount of its Series 2016A 3.25% Senior Notes.

In May 2026, Georgia Power issued $150 million aggregate principal amount of additional Series 2025B

4.85% Senior Notes due March 15, 2031, $600 million aggregate principal amount of Series 2026A Floating Rate Senior Notes due November 22, 2027, and $550 million aggregate principal amount of Series 2026B 4.60% Senior Notes due June 15, 2029.

In June 2026, Georgia Power repaid at maturity both of its long-term floating rate bank loans totaling $400 million.

In March 2026, Mississippi Power issued approximately $75 million aggregate principal amount of Series 2026A Floating Rate Senior Notes due May 15, 2076.

Subsequent to June 30, 2026, Mississippi Power repaid at maturity $65 million aggregate principal amount of its Series 2023A 5.64% Senior Notes.

In June 2026, Southern Power issued $600 million aggregate principal amount of Series 2026A 4.80% Senior Notes due June 15, 2031.

Also in June 2026, Southern Power repaid at maturity €500 million (approximately $564 million) aggregate principal amount of its Series 2016B 1.85% Senior Notes.

In May 2026, Southern Company Gas Capital issued $500 million aggregate principal amount of Series 2026A 6.05% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due September 15, 2056, guaranteed by Southern Company Gas.

In June 2026, Southern Company Gas Capital repaid at maturity $350 million aggregate principal amount of its 3.250% Senior Notes.

Also in June 2026, Nicor Gas repaid at maturity $100 million aggregate principal amount of its 2.66% Series First Mortgage Bonds.

Credit Rating Risk

At June 30, 2026, 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, 2026 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, 2026.

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.