Southern Power Company Fixed Income Update June 20, 2016 Cautionary Note Regarding Forward-Looking Statements
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Southern Power Company Fixed Income Update June 20, 2016 Cautionary Note Regarding Forward-Looking Statements Certain information contained in this presentation is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning Southern Power Company’s (“Southern Power”) corporate strategy, future renewable investment opportunities, completion of announced construction projects and acquisitions, the anticipated timing of completion of Southern Company’s acquisition of AGL Resources and anticipated operational performance. Southern Power cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Power; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Southern Power’s Annual Report on Form 10-K for the year ended December 31, 2015, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, environmental laws regulating emissions, discharges, and disposal to air, water, and land, and also changes in tax and other laws and regulations to which Southern Power or its subsidiaries are subject, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries, including, without limitation, Internal Revenue Service and state tax audits; the effects, extent, and timing of the entry of additional competition in the markets in which Southern Power or its subsidiaries operate; variations in demand for electricity, including those relating to weather, the general economy and recovery from the last recession, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions; available sources and costs of fuels; effects of inflation; the ability to control costs and avoid cost overruns during the development and construction of generating facilities, to construct facilities in accordance with the requirements of permits and licenses, and to satisfy any operational and environmental performance standards, including the requirements of tax credits and other incentives; advances in technology; state and federal rate regulations; the ability to successfully operate generating facilities and the successful performance of necessary corporate functions; internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Power; risks to the completion of Southern Company’s pending acquisition of AGL Resources, including the failure to receive, on a timely basis or otherwise, the required approvals by government or regulatory agencies, and the risk that a condition to closing may not be satisfied; the ability of counterparties of Southern Power or its subsidiaries to make payments as and when due and to perform as required; the ability to obtain new short- and long-term contracts with wholesale customers; the direct or indirect effect on Southern Power’s business resulting from cyber intrusion or terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts; changes in Southern Power’s credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements; the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on currency exchange rates, counterparty performance, and the economy in general; the ability of Southern Power to obtain additional generating capacity (or sell excess generating capacity) at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences; the direct or indirect effects on Southern Power’s business resulting from incidents affecting the U.S. electric grid or operation of generating resources; and the effect of accounting pronouncements issued periodically by standard-setting bodies. 2 Southern Company – Parent of Southern Power • Southern Power is a subsidiary of Southern Company, one of the largest electric utilities in the world – Each major subsidiary of Southern Company, including Southern Power, issues its own debt with no parent or cross-affiliate guarantees Electricite Dominion Southern National Duke E.ON Exelon Enel NextEra de France Resources Company Grid Energy Ticker EOANGR EDF EXC ENELIM D SO NGGLN NEE DUK Düsseldorf, Paris, Richmond, Warwick, Juno Charlotte, Headquarters Chicago, IL Rome, Italy Atlanta, GA Germany France VA UK Beach, FL NC Market Cap $19.6 $25.5 $31.6 $46.0 $44.5 $46.4 $54.7 $55.4 $53.9 (bn)1 LT Debt (bn)1,2,3 $19.7 $58.5 $30.0 $48.5 $24.2 $34.4 $35.9 $27.8 $38.2 1 Assumes 1.11 EUR/USD and 1.45 GBP/USD. Market Cap as of May 31 2016 2 Source: Most recent filing of the respective Company as of May 31, 2016, including Company 10-K, 10-Q, Company websites, or Company Reports; Does not include current portion of LTD or Securities due within one year. 3 For Southern Company, reflects net adjustment of $8.3 billion due to parent debt issuance and retirement of subsidiary debt subsequent to most recent quarterly filing 3 Southern Power Overview 4 Retail Electric Operating Companies 1 Wholesale Electric 1 Natural Gas Operating Company Operating Company Alabama Power Georgia Power (Pending Acquisition)1 Company Company Southern Power Gulf Power Mississippi Power Company AGL Resources Company Company (Issuing Entity) (BBB+/Baa1/BBB+)2 • Southern Power is a leading U.S. wholesale clean energy provider meeting the electricity needs of public power entities and investor-owned utilities • Southern Power currently owns 36 generation facilities totaling 10,661MW of 3 capacity (natural gas, solar, wind and biomass) – Southern Power owns no coal or nuclear facilities (1) Southern Company’s acquisition of AGL Resources is expected to close in the second half of 2016 (2) Senior Unsecured Ratings per S&P/Moody’s/Fitch. Outlooks are Negative/Stable/Stable, respectively. A securities rating is not a recommendation to buy, sell or hold a security and may be subject to revision or withdrawal at any time. (3) Reflects facilities owned, under construction or under contract to purchase as of March 31, 2016 4 Southern Power Business Model • Sell generating capacity and energy covered by long-term contracts – Contracted revenues are not linked to market power prices • Minimize fuel and transmission risks using pass-through contract provisions • Execute contracts with strong credit support Illustrative Contract Structure: Natural Gas and Biomass Sample Customers: Fixed $/kW monthly capacity charge Non-Affiliate IOUs (Duke Energy) Energy as scheduled by customer Affiliate IOUs (Georgia Power) Municipalities (Orlando Utilities) Cooperatives (Seminole Electric) Fuel pass-through revenue Illustrative Contract Structure: Solar and Wind Sample Customers: Energy as generated Non-Affiliate IOUs (Nevada Power) Affiliate IOUs (Georgia Power) Fixed $/MWh energy charge Municipalities (City of Austin TX) Cooperatives (Flint EMC) 5 Southern Power Growth 2001 to 2010: Built and acquired natural gas assets in the Southeast U.S. • 7,880 MW1 • $3.2B2 of investment • Assets in 4 states 2010 to 2014: Entered renewables space in Southwest U.S. • 1st solar acquisition in 2010; Biomass in 2012 • Incremental 1,194MW1 across 10 projects • $2.2B2 of incremental investment ($5.4B total investment) • Assets in 8 states 2015 to 2016: Significant continued growth in renewables space • 1st wind acquisition in 2015 • Incremental 1,587MW1,3 across 18 projects • $4.1B2,3 of incremental investment ($9.5B total investment) • Assets in 10 states (1) MW numbers represent nameplate capacity and reflect Southern Power and its subsidiaries’ ownership interest. (2) Represents total gross investment on Southern Power consolidated financial statements adjusted for non-controlling interest (3) Reflects facilities owned, under construction or under contract to purchase as of March 31, 2016 6 Southern Power – A Nationwide Clean Energy Fleet Diversified Portfolio •G Natural Gas 1,2 2 •S Solar Type MW % Net Book Value % Natural Gas 8,600 81% $2.4B 26% W• Wind W Solar 1,454 14% $5.8B 61% •B Biomass Passadumkeag Wind 491 5% $0.9B 9% • Under Construction Biomass 115 1% $0.4B 4% Total 10,661 100% $9.4B 100% S North Star S Tranquillity S Apex Spectrum S Granville S S Desert Stateline Cimarron S Grant Wind W W Kay