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southern 1999 Editorial Section


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southern 1999 Editorial Section

  2. 2. SOUTHERN COMPANY is one of the world’s leading energy suppliers and the largest producer of electricity in America. Our goal is to grow 8 percent annually. We’re producing and acquiring more energy and selling it to large wholesale customers in targeted regions throughout North America and around the world. Our strategy includes building and buying more generating plants and gaining access to more natural gas. We’re aiming to be the best investment in our industry, and we plan to achieve that through aggressive growth. FINANCIAL HIGHLIGHTS 1999 1998 change Operating revenues (in millions) $11,585 $11,403 1.6)% Earnings as reported (in millions) $1,276 $977 30.6)% * Earnings from operations (in millions) $1,303 $1,225 6.4)% Basic and diluted earnings per share as reported $1.86 $1.40 32.9)% * Basic and diluted earnings per share from operations $1.90 $1.76 8.0)% Dividends per share $1.34 $1.34 –) Dividend yield (percent) 5.7 4.6 23.9)% Average shares outstanding (in millions) 685 697 (1.7)% Return on average common equity (percent) 13.43 10.04 33.8)% Book value per share $13.82 $14.04 (1.6)% 23 1/2 29 1/16 Market price (year-end, closing) (19.1)% Total market value of common stock (year-end, in millions) $15,646 $20,278 (22.8)% Total assets (in millions) $38,396 $36,191 6.1)% * Southern Energy’s earnings from operations (in millions) $355 $239 48.5)% * Earnings from operations exclude items not related to day-to-day business activities. CONTENTS 4 Big Picture …Tiny Details 18 Soaring Higher Low costs, high reliability, the best We’re serious about improving the customer service and cleaner electricity. world around us. 6 On Top of the Box 20 Extraordinary Joes Our innovation started in the Southeast These Joes are special. and often makes us the first, the fastest 22 Have a Cup of Joe … with Bill and the best. Bill Dahlberg talks a little more about our 10 Expanding Our World accomplishments, strategy and future. Our growth and success in targeted regions 24 Financial Review throughout North America and around the 66 Directors and Officers world are beating expectations. 16 Opportunities Abound 68 Shareholder Information We work to get the highest value from every part of our business.
  3. 3. It’s Bill Dahlberg, our chairman and chief executive officer. His vision and ability to lead us down the right road has helped us achieve all-time record earnings and growth. We’re Southern Company… not your ordinary average Joe electric utility.
  4. 4. Areas in which we provide... Electricity Gas Electricity & Gas Competitive Energy Business Regions North America Markets California/Southwest, Midwest, Northeast, Southeast, Texas Products/Services • Electricity generation • Natural gas storage and management • Wholesale energy trading and marketing Subsidiaries, • Southern Company Generation Affiliates & • Southern Energy We’re one of the largest energy businesses Business Units • Southern Company Energy Marketing • Southern Wholesale Energy in the world and America’s largest producer of electricity. With generating facilities in key markets, significant natural gas operations Major Customers • Brazos Electric Power Cooperative and one of North America’s largest energy • California ISO trading and marketing operations, we can • California Power Exchange • Commonwealth Edison supply energy almost anywhere in the United • Florida Power & Light • Florida Power Corporation States. Internationally, we focus on targeted • New England ISO • New York ISO markets with high growth. • Virginia Electric & Power • Other electric and gas utilities, municipal utilities, cooperatives, large industrial users, oil and gas producers, electricity generators and other marketers Main Competition • Other power producers, energy marketers and utilities
  5. 5. Sweden Norway Finland England Canada Denmark Germany Netherlands United States China Bahamas Trinidad Philippines & Tobago Brazil Countries in which we provide energy Regulated Business Other Business International Southeast Southeast Asia, Europe, South America, Caribbean Alabama, Florida, Georgia, Mississippi Alabama, Florida, Georgia, Mississippi • Electricity generation • Electricity sales and distribution to retail customers • Energy services • Electricity sales and distribution to retail customers • Security monitoring • Wholesale energy trading and marketing • Wireless telecommunications • Southern Energy • Alabama Power • Southern Company Energy Solutions • Bewag AG • Georgia Power • Southern LINC • Companhia Energetica de Minas Gerais (CEMIG) • Gulf Power • Consolidated Electric Power Asia (CEPA) • Mississippi Power • Freeport Power • Savannah Electric • PowerGen • Southern Nuclear • Southern Energy – Europe • Western Power Distribution • About 2.1 million customers in Berlin • About 3.9 million consumers and businesses in • More than 50 other utilities and their customers • Homes and businesses in southern Brazil the southeastern United States, ranging from large, • Mall of Georgia • Guangdong Provincial Power Bureau in China industrial customers like Chevron in Mississippi to • Lenox Square • National Power Corporation and industrial companies heavy residential and commercial users like the • Residences and businesses around the Southeast in the Philippines Atlanta metropolitan area • Nearly 200,000 users of wireless telecommunications • About 15,000 homes and businesses in Grand Bahama services in the southeastern United States • Trinidad and Tobago Electricity Commission • Other utilities and wholesale customers in the European Union nations • About 1.3 million consumers and businesses in southwestern England • Other independent power producers from Europe • Other power producers and distributors • Utilities and other energy services companies and the United States • Other security companies • Regional utilities • Specialized mobile radio providers, personal communications system and cellular carriers, and paging companies
  6. 6. OUR BUSINESS IS ENERGY. We supply it. To millions of people. To large energy users in regions with significant growth. In the Southeast. In California. In New England. And in other targeted areas throughout the United States. In China and the Philippines. In Germany and other European Union countries. And in South America and the Caribbean. We’re big. Nearly 50,000 megawatts big. That’s among the biggest. We generate more electricity than anyone else in the United States. We know what we’re doing. That’s clear in our growth. And in our success as one of the world’s largest suppliers of energy. We are among the best in reliability, customer satisfaction and costs. And in making electricity cleaner. We’re successful. Our strategy is working. Our growth is exceeding our goals. We’re doing what we said we would do. Don’t get me wrong. I’m not making excuses. And I’m not ACHIEVING RECORD EARNINGS In 1999, we achieved record earnings of $1.3 billion. happy about our return in 1999. But it does help to keep it Earnings per share as reported were $1.86. in perspective. Earnings per share from operations were $1.90. It’s an 8 percent increase over 1998. It also beats our 1999 goal AIMING TO BE THE BEST of $1.85 per share. Our overall goal has not changed. We intend to be the best We had a great year financially. The best ever. investment in our industry. Everything we do is aimed at But the stock market did not reward our performance. that goal. You and I – as owners of our company – lost share value. We will continue to do the things that we feel make us a That’s amazing. How could that happen? great investment. Like leading the innovation in our industry. I believe it’s due in great part to the ongoing And achieving greater than ever success. Change in our indus- investing frenzy. The stock market’s interest in Internet try is a challenge for many utilities. And for investors and and technology companies has lessened investor interest in analysts. For us, it has been an opportunity. backbone industries like ours. We used to be a southeastern regulated utility business. I believe it’s also due to the ongoing change in our indus- We are now an international competitive energy giant with try. Investors are sitting on the sidelines, waiting to see how some southeastern regulated utility operations. And we’re it will all shake out. They no longer have a single, predictable growing bigger. formula by which to judge performance. More than a third of our profits come from our competitive Importantly, our return was better than our industry aver- business. In three years, we project that it will grow to 50 per- age. And over the past 10 years, our average annual return cent. Beyond that, the percentage should continue to grow. was 11.4 percent. That compares with an industry average Our goal is to grow earnings another 8 percent this year. of 8.9 percent. Our earnings per share target for 2000 is $2.05. I believe this 2
  7. 7. OUR COMPETITIVE ENERGY BUSINESS CONTINUES TO GROW 50% 2003* 35% 1999 1995 10% EARNINGS FROM COMPETITIVE BUSINESS (Includes our wholesale business in the Southeast) * Projected growth is achievable based on the investments and plans we NOT YOUR ORDINARY AVERAGE JOE already have in place. In the near term, there likely will still be some uncertainty Our strategy for growth is simple. We’re working to be a about how to judge success in our changing industry. And the major supplier of environmentally friendly energy in the high- Internet and technology companies will probably continue to growth, large-use markets that we’ve targeted. They include dominate the attention of investors. In a way, that’s okay. I the Southeast, Northeast, California/Southwest, Midwest and like to think of the exploding information age and technology Texas in North America, China and the Philippines in Asia, boom in terms of what powers it. We do. and the European Union countries. But in the long-term, I believe growth in earnings will be We’re adding more generation and making electricity what really matters. That’s why we’re not your ordinary aver- cleaner. We’re also taking our expertise in producing power age Joe electric utility. And why I believe Southern Company from coal and applying it to natural gas. We’ve been running is and will continue to be one heck of an investment. plants for more than 70 years. No one does it better. Thank you for being shareholders. UNLOCKING THE VALUE Our growth as a competitive business has created what I believe is significant value. But that value has not been reflected in our share price. One of my priorities is to get that value to our shareholders. That means we’ll be looking at our company even more differ- A.W. Dahlberg ently than we have in the past. And we’ll be considering vari- March 17, 2000 ous options. I want to unlock the value we’ve created. 3
  8. 8. Big Picture “It’s important to appreciate that everything contributes to the big picture. We pay attention to details.” MAKING EXCELLENCE A STANDARD Our regulated business makes excellence a standard. Its growth in energy sales – projected to be 2.2 percent annually for the next 10 years –is among the best of any regulated electric business in the United States. We never take our eyes off the foundation of our business. Low costs, high reliability, the best customer service and cleaner electricity–that’s what it is all about. Our emphasis on cost control has helped keep our prices at or below what others would charge if they could sell energy to homes and businesses in our service area. In customer service, our five regulated electric utilities are the best. They hold the top five spots in a national survey rating satisfaction among large energy users. We continue to reduce the rate of emissions at our generating plants. For example, we’re plan- ning to spend more than $700 million over the next three years to help make the air cleaner in metropolitan Atlanta because we want every megawatt-hour we produce to be cleaner –on average – than it was the year before. 4
  9. 9. Tiny Details THIS IS NOT JOE For Allen Franklin , our president and chief operating officer, enjoying the outdoors is second nature. 5
  10. 10. On Top of the Box 6
  11. 11. THIS IS NOT JOE Collecting and restoring jukeboxes, Charles McCrary – president of Southern Company Generation and our chief production officer – does a lot of thinking on top of the box. “Working smart and taking advantage of every opportunity allows us to generate some beautiful music.” PRODUCING AND SUPPLYING ENERGY Our fundamental business is producing and supplying energy. And our wholesale business in the Southeast continues to be the model for our transition to a competitive energy supply business. The key is making the best use of our assets– producing electricity at the lowest possible cost and then selling it to get the best value for our shareholders. GROWING AGGRESSIVELY IN THE SOUTHEAST We have a large and aggressively growing competitive energy supply business in the Southeast. It helps us get the most value out of the more than 31,000 mega- watts of generating capacity we own in the region. Our competitive energy supply business in the Southeast is aiming to grow its net income 10 percent annually. 7
  12. 12. We’re growing aggressively and making our electricity cleaner. Doing that creates value for our shareholders and our customers. GROWING COMPETITIVELY In the Southeast, our competitive energy supply business drives our growth. The portion of our generating capacity in the Southeast dedicated to our THIS IS NOT JOE competitive energy supply business will grow from its current 13 percent to about 28 percent by 2003. And that’s while we add nearly 7,000 megawatts of new environmentally friendly gas-fired generation. The 10,000 megawatts we will use to serve wholesale customers in the Southeast will make our competitive energy supply business larger than many investor-owned utilities. PROFITING FROM OPPORTUNITY Southern Wholesale Energy – or SWE – acts as an agent for our regulated business. Demand for electricity from our retail and wholesale customers fluctuates throughout the year. As a result, there’s an opportunity for us to sell and buy elec- tricity according to market prices and demand for electricity. SWE does that, buy- ing when market prices are below our cost to produce, and selling when we can make a profit. NEITHER IS THIS... MANAGING RISK SWE has long-term contracts to supply more than 4,000 megawatts of electricity to about 30 large customers. We continue to expand this business. In 1999, we added more than 800 megawatts of new long-term contracts. Long-term deals help minimize risk. When we add new generation dedicated to serve competitive energy markets, our target is to have wholesale customers already committed to about 80 percent of the output. We then sell the remainder on a short-term basis. GETTING THE BEST VALUE We plan to continue being the leading energy supplier in the Southeast. That means we’ll continue developing generation to meet the region’s future OR THIS... energy demands. SWE’s success at getting the best value from generation is the model on which we base our competitive energy supply business in North America and throughout the world. With SWE, we buy and sell electricity and fuel through our energy marketing and trading organization in Birmingham, Alabama. From the top: Ken Damsgard, fuel buyer; Angela Dunn, fuel analyst; Steve Lowe, trader; Jackie Abercrombie, risk control analyst. 8 OR THIS...
  13. 13. Competitive Energy THIS IS NOT JOE It’s Kim Flowers, manager of Plant Smith in northwest Florida. She’s leading our efforts to increase the facility’s efficiency while also decreasing its rate of emissions. 9
  14. 14. “Discovering a world of opportunities and growth is sometimes a matter of looking in the right places.” Expanding MAKING A GOOD THING BETTER Southern Energy’s faster than expected growth and greater than expected success helped Southern Company achieve record earnings. We’re working to continue that. Our competitive energy business outside the Southeast is growing fast. Southern Energy’s 1999 earnings from operations were $355 million, compared with $239 million in 1998. We have a large, balanced competitive energy supply business. From that base, we’ve targeted regions with high, increasing energy use throughout North America and around the world. More than half the revenue in our competitive energy supply business comes from long-term contracts. No single project contributes more than 17 percent of our cash. We’re well positioned to continue taking advantage of increasing growth opportunities. 10
  15. 15. THIS IS NOT JOE Marce Fuller–chief executive of Southern Energy and scuba diving enthusiast –is helping expand our world. Our World 11
  16. 16. THIS IS NOT JOE It’s Gary Morsches, who leads our energy trading and marketing efforts. With nearly 500 stations, our new facility is one of the world’s largest state-of-the-art energy trading floors. North Am We believe we are the first and best truly national competitive energy business. We can buy and sell energy anywhere in North America. In addition to our more than 31,000 megawatts of generation in the Southeast, we have 12,000 megawatts – that we own, are building, or have control over – in the Northeast, California/Southwest, Midwest, and Texas regions. We’re also a virtual natural gas company with access to and control over 25 billion cubic feet of storage, 545 million cubic feet of transportation, and 1.6 billion cubic feet per day of production. Northeast, California/Southwest, Midwest, and Texas regions. INCREASING PROFITS We are big and growing. In 1999, we traded more than And that’s why we’re working to double that through acquisi- 219 million megawatt-hours of electricity, giving us an 8.3 per- tions and building new generation. cent share of the U.S. wholesale electricity market. We also traded 5.4 billion cubic feet of natural gas per day. MEETING U.S. ENERGY NEEDS Through Southern Company Energy Marketing, we buy While they don’t receive any bills directly from us, chances and sell electricity, natural gas, coal and oil from and to utili- are that – when the 250,000 students at the 50 colleges and ties, independent power producers, marketers and others. universities in the Boston area power up their computers and Having our energy trading and marketing group sell power research projects ... and when the financial markets take off for from our generating plants significantly increases profits and another ride on Wall Street ... and when a cable car makes a reduces risk. That’s because we use our knowledge of competi- trip into downtown San Francisco ... and when the fast-paced tive markets to run our plants in response to daily – and even futures traded at the Chicago Mercantile Exchange are offi- hourly – price changes. And that leads to bigger profit margins. cially recorded ... and when air conditioners run full blast to That’s why we have 12,000 megawatts of generating capac- ease the Dallas heat – some of the electricity they use comes ity – that we own, are building, or have control over – in the from us. 12
  17. 17. NO JOES HERE... OR HERE Randy Harrison – who leads our California opera- tions – and environmental manager Ron Kino have their hearts in helping light up San Francisco. Our 3,065 megawatts in the Bay area are “must-run” plants needed to meet the city’s energy needs. Norm Cowden, our project manager in Massachusetts, erica is helping Boston’s “Clean Charles 2005 Initiative.” Expanding our Kendall plant in Cambridge reduces emissions. It includes cooling water discharge equip- ment that will re-oxygenate and revitalize the bottom of the Charles River, helping the community’s efforts to make the river swimmable and fishable by 2005. electricity to the Windy City. Near Green Bay, our plant NORTHEAST In the Northeast, our generating capacity of about under construction will pack in 306 megawatts of state-of- 3,000 megawatts goes into the systems that serve energy users the-art, gas-fired generation and should add another in New York and Massachusetts. To help meet the growing 219 megawatts in 2008. needs of those areas, we’re planning to add 1,500 megawatts of new environmentally friendly, gas-fired generation. TEXAS We have a major presence in Texas, where market growth is strong and capacity is short. We’re building a 460-megawatt, CALIFORNIA Our plants in California are not far from Silicon Valley and gas-fired plant that will expand to 780 megawatts by 2005. are anything but laid back. They are environmentally friendly, We also manage 1,650 megawatts for the Brazos Electric gas-fired “must-run” units, meaning their 3,065 megawatts Power Cooperative in the Dallas-Fort Worth area. are needed to meet the basic energy needs of the San Francisco area. So are the 1,050 megawatts that we’re adding by 2003. CONTINUING SUCCESS Our strategy is to continue pursuing new generation and link it to our trading and marketing operations. To take better MIDWEST In the Midwest, we’re breezing into Chicago and aiming to advantage of increasing growth opportunities, we may need be a big cheese in Wisconsin. We’re planning to more than more than our initial goal of 24,000 megawatts. But we don’t double the size of our Indiana plant that currently provides buy everything that becomes available. It has to be the right 490 megawatts to Commonwealth Edison, which supplies opportunity in the right place at the right price. 13
  18. 18. Around the World With our aggressive growth, we’re building our competitive energy business in key areas around the world. Internationally, we have focused regional strategies that significantly add to our growth and open up additional opportunities. We only go where we can be a major player and where we feel the level of risk is manageable. to 14,000 megawatts of generation to link to our trading and EXCEEDING ALL EXPECTATIONS Our growth in Asia is exceeding all our expectations. marketing operation. Consolidated Electric Power Asia (CEPA) – our subsidiary Our investment in Bewag can be a base for gaining access headquartered in Hong Kong – had earnings of $175 million to that additional generation. We own 26 percent of that in 1999. That compares with $68 million in 1998. utility, which serves the metropolitan area of Berlin. We finished building and are now running Sual, a 1,218- In England, we have Western Power Distribution, formerly megawatt plant that provides the cleanest and lowest cost fos- known as SWEB. This operation provides a stable earnings sil-fuel electricity in the Philippines. Electricity generated goes base and has set the standard for performance in that country. to the National Power Corporation of the Philippines through Our European operations had reported earnings of a 25-year agreement we reached before undertaking the project. $170 million in 1999. Depending upon how quickly the Sual and our other generating facilities in the Philippines markets open to competition, there is potential for significant and China make us the largest non-governmental independent growth opportunities. power producer in Asia. We will continue to look for oppor- tunities to expand our growth there. EVALUATING POTENTIAL In South America, Brazil offers some high-growth opportuni- ties, but also some structural and economic challenges. With GROWING IN EUROPE In Europe, we have an energy trading and marketing opera- our small investment in CEMIG, we’re taking a wait-and-see tion that we opened in Amsterdam in 1999. Our target mar- approach that allows us to change our investment depending ket area is the north-south corridor of European Union upon the potential we see. nations from Scandinavia to Italy. In the Caribbean, we’ll continue to operate Freeport Power If the competitive wholesale electricity market evolves as it in the Bahamas and PowerGen in Trinidad and Tobago. Though has in the United States, we will seek to acquire or build up small, these operations are highly successful. 14
  19. 19. THIS IS NOT JOE With our new Sual generating plant – and led by our country executive Ed Bautista – we’re providing the lowest cost and cleanest energy available in the Philippines. With the new high school we built, we’re also helping to provide an education for nearly 500 students on Pagbilao Island.
  20. 20. Opportunities THIS IS NOT JOE It’s Thorolese Hunt, who helps develop product and pricing strategies for mar- keting Southern LINC…and she has the Internet in her hand. And e-mail. And contact lists. And instant messag- ing and conferencing. Southern LINC is our state-of-the-art wireless communi- cations service. 16
  21. 21. LEADING RESEARCH New, cleaner and more efficient ways to produce and use energy – that’s the focus of our research and drive to be a technological leader. We’re helping develop the energy sources of the future. Microturbines are relatively small electric generating units that can be run from remote locations, including customer sites. Our test program is aimed at finding where and how these units might be economical. We’re participating in a three-year, $7 million joint project at the Houston Advanced Research Center’s new Center for Fuel Cell Research and Applications. In addition, we’re working with three other companies to build and install a 250-kilowatt demonstration fuel cell power plant at the Mercedes-Benz production facility in Tuscaloosa, Alabama. Our objective is to find how fuel cells can be a clean, reliable and affordable energy source. Abound We work to get the best value from every part of our business. We do that by being a techno- logical leader in research. And by offering a variety of energy solutions and other services. MAXIMIZING VALUE Marketing a variety of energy and related services helps maximize the value of our business. We offer customers ways to improve their energy usage and to take advantage of other services we already have in place. For example, we improve power quality to large customers by marketing flywheels. The flywheels store energy that provides backup protection during short outages. Partnering with the U.S. Department of Energy in its national Energy Smart School program, we’re helping schools use energy more efficiently by modernizing their lighting and upgrading heating and cooling systems. The savings achieved will be reinvested in the schools. Southern LINC is another example of maximizing value. We set up this wireless communications service for use by our regulated business in the Southeast as well as by commercial businesses and government agencies. Now, fast-growing Southern LINC has nearly 200,000 customers. 17
  22. 22. REDUCING EMISSIONS Every day, more than 400 Southern Company employees work on protecting and improving the quality of the air, land and water around us. And they’ve been doing a good job. Since 1990, we have reduced total nitrogen oxide (NOx) emissions by more than 20 percent and per-megawatt-hour NOx emissions by nearly 40 percent. During the same time, we’ve reduced total sulfur dioxide (SO2) emissions by almost 30 percent and per-megawatt-hour SO2 emissions by nearly 40 percent. And that’s while increasing our electricity production by 20 percent. Although carbon dioxide (CO2) emissions are not regulated, we were one of the first companies to join the U.S. Department of Energy’s Climate Challenge Program. Over the past nine years, we have voluntarily reduced, avoided or off- set nearly 33 million metric tons of CO2. Improving the world around us is a commitment we take seriously. We passionately believe in protecting and improving the environ- ment. Over the past 10 years, we have invested more than $4 billion doing that, and our efforts will continue. MAKING ENERGY CLEANER Our efforts to reduce emissions will continue. Our projections for 2010 include further reducing NOx by more than 40 percent and SO2 by more than 25 per- cent. We want every megawatt-hour we produce to be cleaner – on average – than it was the year before. As we grow, our new generation will be increasingly environmentally friendly. For example, in the Southeast, 78 percent of our electricity is currently gener- ated from coal. We project that will decrease to about 60 percent by 2010 and to about 45 percent by 2020. As a result, we expect to decrease per-megawatt- hour CO2 emissions by about 12 percent by 2010. IMPROVING THE ENVIRONMENT We also have many other activities aimed at improving the environment. Our Environmental Teachers Corps annually helps more than 40,000 students learn about conservation and recycling. Employees voluntarily participate in various programs that help monitor rivers, protect wildlife habitats and support sea turtles and other animals, birds and fish. We sponsor the largest employee electric vehicle lease program in the United States. Because we’re the largest producer of electricity in America, we do more than most companies to improve the environment wherever we do business. In addition, we’re a leader in protecting and improving the environment through our employees’ actions, education and volunteerism. Visit our web site that offers environmental education, ways to get involved, and updates on our activities: 18
  23. 23. THIS IS NOT JOE It’s Rutherford ... and he’s proud to make a home for his family near our Goat Rock hydroelectric project in Georgia. On the land around our generating plants and in our communities, we provide habitat and support for many varieties of animal and plant life. Soaring Higher
  24. 24. THIS IS JOE JoAnn Dagele – executive assistant, Suffern, New York – helps keep our growing New York operations rolling along smoothly. Extraordinary THIS IS JOE Josie Watson – marketing administrative assistant, Savannah, Georgia – uses a customer-first approach THIS IS JOE to provide energy-efficient Joe Lingold – real-time trader, solutions to customers in Atlanta – buys and sells power the Southeast. to be delivered and used almost immediately in the eastern United States.
  25. 25. THIS IS JOE THIS IS JOE Joe Putzell – fuel handling Joe Colquitt – field services operator, Northwest Indiana/ representative, Columbus, Chicago – helps produce the Georgia – is always looking up, 490 megawatts we generate to and that kind of perspective help power the Chicago area. helps us rank among the best in customer satisfaction. Here are a few of the Joes who are part of Southern Company. But they are not ordinary or average. Their extraordinary skills and commitment help make us one of the world’s leading competitive energy companies. THIS IS JOE Kathy Jo York – electrical engineer, Joes Birmingham, Alabama – works on computer technology that analyzes power flow to help make our relia- bility among the best in our industry. THIS IS JOE Joe Ho – project director, Hong Kong – works on developing fast-growing business opportunities in the Philippines and Australia.
  26. 26. Have a Cup What made 1999 such a good year? We delivered on what we said we would do. We met our goals. In Asia, we’re achieving better numbers than the business case that led us there. We completed construction and began producing power at Sual. It now provides the cleanest and lowest cost energy in the Philippines. Our competitive energy business is doing very well. We now own, are building or have control of about 12,000 megawatts in the highest growth areas of the United States outside the Southeast. That’s about halfway to our goal. Overall, we now have nearly 50,000 megawatts of generation, more than anyone else in the United States. We’ve done all this while maintaining our focus on customers and continuing our financial success. So our strategy is working. It is. We continue to expand our growth. And we’ve sharpened our focus, targeting high-growth, high-use markets where we can be a leading supplier. But we haven’t met our overall goal. That’s to be the best invest- ment in our industry. Financially, we had our best year ever in 1999. But when you achieve so much and it doesn’t show up on the scorecard of our owners – our shareholders – it doesn’t give me a warm feeling. What are we doing to help improve our return to shareholders? We’re going to continue to execute our strategy. And work to continue increasing our earnings. As a competitive energy company, we’ve become unique in our industry. I think our success should earn us a higher multiple (stock price divided by earnings per share) than the rest of our industry. I also think our stock is significantly undervalued. The stock market doesn’t seem to be rewarding our growth. It isn’t. Our high-growth competitive business has created value. But our shareholders haven’t been rewarded for that yet. So we are 22
  27. 27. of Joe...with Bill looking at ways to unlock that value. We will continue to consider In addition, we’ve made changes to our senior executive team various options that will enhance shareholder value. We want our without losing any momentum. Our aggressive growth created the shareholders to benefit from the value our growth has created. need for a president and chief operating officer position. And I named Allen Franklin, who was president of Georgia Power, to that role. I also called on Marce Fuller to be the new chief executive Where does our growth come from? It comes from providing energy reliably and at low cost to large officer of Southern Energy. energy users in markets where it’s needed most. And that’s what we I have great pride in all our employees and their commitment do best. We’ve been doing that for a long time with our wholesale to making us the best in our industry. operations in the Southeast. Deregulation of wholesale electricity created opportunities for us to expand throughout North America. What makes Southern Company unique? We’ve done that. And we’ve also taken advantage of opportunities We are a rapidly growing competitive energy business. We’re big. to do that in areas we’ve targeted throughout the world. We’re smart. And we’re successful. We’re doing what we said we would do. We’re meeting our goals. In the United States, we have a network of generating plants How is our regulated business doing? I judge the success of the regulated business by reliability and cost. coast to coast. We have a growing energy trading and marketing Our system is well operated, and we have maintained it well. It’s a group that sells our product. Internationally, our competitive very successful business. energy business is performing strongly in Asia. And in the European Union countries, we’re looking at replicating our successful North American business. What are we doing to make the electricity we produce cleaner? We’re making changes to existing plants. All the new generation We offer the best prospects for long-term sustainable growth we’re building will use state-of-the-art environmentally friendly along with the stability of a low-risk, financially strong regulated technology. Our goal is to make every megawatt-hour cleaner – business. I don’t believe anyone else in our industry can do that as on average – than it was the year before. And we’re doing that. well as we can. What is the biggest change in Southern Company? Where do we go from here? Not long ago, we were a southeastern regulated utility business. We have a good balance of businesses we know well. We’ll con- Now we’re an international competitive energy giant with some tinue to look at expansion and acquisitions carefully and cautiously. southeastern regulated utility operations. And we’ll continue to move aggressively to capitalize on the right opportunities. I like our position. The best market in the United States is the How do we find the skills to be a competitive energy business? No one has more expertise in the basic energy business than our Southeast, and we’re the major energy supplier there. The best employees. And we haven’t departed from the basic energy business. market in the world is the United States, and we’re a major energy We found new expertise in energy trading and marketing and supplier in fast-growing, high-use regions. And we’re a major sup- risk management in the marketplace. There is a great willingness to plier in other key areas of the world as well. join Southern Company because of our reputation as an industry We’ll continue to grow and work toward being the best invest- leader and as a great place to work. ment in our industry. 23