southern 2001 Letter to Our Shareholders


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southern 2001 Letter to Our Shareholders

  1. 1. LETTER TO OUR SHAREHOLDERS on solid ground Allen Franklin Chairman, President, and CEO Mild weather and a weak economy. These are words no one in our business likes to hear. They are the words, though, that best describe the business environment we faced in 2001. It challenged our ability to create value for our shareholders. But I’m pleased to report that we rose to the challenge and delivered solid results. Our results from continuing operations for 2001 position us as one of the industry’s strongest performers. Net income for 2001 was $1.12 billion. Our earnings per share of $1.62 represented a 6.6 percent increase from 2000 and exceeded both our own target and the consensus expectations of analysts. 4
  2. 2. Solid Performance competitive units is sold primarily under long-term contracts, so Continued customer growth and significantly lower interest we are not subject to the degree of price volatility that has been expenses offset the reduced demand for electricity caused by experienced elsewhere among independent power producers. the weather and economy. We saw that our business model and For this business, we define the Southeast broadly to include our employees can withstand negative factors and still produce several states beyond the area of our regulated retail business. positive results. In the future, the scope of our wholesale business may very well I’m especially pleased to report that our stock performed expand as attractive business opportunities arise. In any event, well in 2001. From April 2, the date of the Mirant spinoff, through we expect future investments to have the low-risk characteris- the end of the year, our shares gained almost 18 percent. We tics of our existing wholesale generation business. maintained our annual dividend of $1.34 per share. The spinoff We also are encouraged by the progress of our new products of Mirant unlocked real value for Southern Company sharehold- and services business. We’re off to a good start on our goal of ers. On March 31, 2000, just before we announced plans to producing $50 million a year in earnings from new products and spin off Mirant, Southern Company’s market value – including services by 2004. This business centers on the development of our 100 percent ownership of Mirant – was $14.1 billion. At the products and services that are closely tied to our own energy end of 2001, our market value – totally excluding Mirant – had expertise and marketed to our existing customer base but which risen to $17.7 billion. produce revenues apart from our traditional kilowatt-hour sales. There are some significant milestones from the past year I’d It’s a business with exciting potential to add to our growth. like to mention. Each was important to our success during 2001 and also helped strengthen our foundation for ongoing success: Looking Ahead • After the spinoff of Mirant, we turned our focus to the As in any year, there are challenges in 2002. Our plans assume Southeast. Our strategy remains based here, in the region continued slow economic activity, at least through mid-year. we know so well. We have demonstrated the flexibility to produce strong financial • We successfully concluded major rate reviews by state results even in a slow economy. However, we hope to see better regulators in Georgia, Alabama, and Mississippi. The out- economic times here and across the country soon. comes provide, for several years, continued predictable We are working on the issue of establishing regional trans- earnings from our regulated business. mission organizations, which would place the planning and • We put in place an executive management team with extra- operation of the high-voltage transmission systems in the ordinary depth of talent, leadership, experience, and under- Southeast in the hands of an independent operator. Our pro- standing of the business. Our management team members posed Southeastern RTO would be one of the country’s largest. have had success both in regulated and competitive energy And we believe its model is consistent with the key principles markets. They share a common vision for our company as the Federal Energy Regulatory Commission is advocating. well as my excitement about the opportunity to lead Southern The overall outlook for Southern Company is excellent. Company to new heights. Our fundamentals are strong. Our region continues to grow. Our management team is talented, motivated, and focused on Sharp Focus keeping our commitments to shareholders and customers. And Going forward, we will continue to concentrate on what we do we remain focused as well on our social and civic responsibilities, best in the region we know best. This produced excellent results including the environment. We believe the pieces are in place in 2001, and I am confident it is the right direction for the future. for success this year and beyond. That’s what we mean when The backbone of our company will continue to be our regulated we say, ”We’re On.” business in Alabama, Florida, Georgia, and Mississippi. It is Thank you for your continued support. strong and it’s growing. It is augmented by higher-growth competitive generation. We are well on the way to meet our five-year goal of doubling the annual earnings from this part of the business by 2005. Our competitive generation business is structured to provide good Allen Franklin returns with relatively low risk. The output from our well-run March 18, 2002 5