Southern Company Reports Solid Fourth Quarter Earnings; Strong Economy in Region Helps Drive 2005 Results

ATLANTA, Jan. 26 /PRNewswire-FirstCall/ -- With continued economic strength in the Southeast and customer growth driving increased use of electricity, Southern Company today reported solid fourth quarter earnings of $158.9 million, or 21 cents a share.

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This compared with reported earnings, including one-time items, of $204.5 million, or 27 cents per share, in the fourth quarter of 2004.

Southern Company also said full-year 2005 earnings were $1.59 billion, or $2.14 a share, exceeding analysts' expectations. Reported earnings for 2004, including the one-time items, were $1.53 billion, or $2.07 per share.

Earnings in 2004 included one-time items in the fourth quarter related to the resolution of an Internal Revenue Service audit for the years 2000 and 2001, which had the net effect of increasing earnings by $24 million, or 3 cents per share. Excluding the impact of the one-time items, fourth quarter 2004 earnings were $180.4 million, or 24 cents a share. Full-year earnings for 2004, excluding the one-time items, were $1.51 billion, or $2.04 per share.

Chairman, President and CEO David M. Ratcliffe said the positive results for 2005 were made possible primarily by the continued strength of the region's economy and the company's focus on achieving unquestionable trust, superior performance and total commitment.

"Southern Company employees met significant challenges in 2005 to deliver outstanding results for our customers, most notably restoring power quickly and safely following the unprecedented damage caused by Hurricane Katrina," Ratcliffe said.

The region continued to attract new residents and businesses throughout the year; despite the overall rate of customer growth slowing because of the hurricanes, the company was serving about 50,000 more customers at the end of 2005 than at the same time a year earlier, an increase of 1.2 percent. Another key earnings driver was the growth in the competitive wholesale generation business, which continued to add new long-term sales contracts to its portfolio.

These and other positive earnings drivers were offset in part by increased operations and maintenance expenses related to serving the growing energy needs of the Southeast and, in the fourth quarter, the resumption of work that had been deferred earlier in the year because of hurricanes.

Fourth quarter revenues were $3.29 billion, compared with $2.67 billion in the same period a year earlier, an increase of 23.2 percent. Revenues for the full year were $13.55 billion, compared with $11.73 billion in 2004, a 15.5 percent increase.

Kilowatt-hour sales to retail customers in Southern Company's four-state service area increased 1.2 percent in 2005, compared with 2004. Residential electricity use increased 2.8 percent. In 2005, some Georgia Power industrial customers were reclassified from the industrial class to the commercial class to be consistent with the rate structure approved by the Georgia Public Service Commission. Adjusting the 2004 numbers for comparison purposes, electricity use by commercial customers -- offices, stores and other non- manufacturing firms - increased 1.5 percent. Industrial energy use declined 0.3 percent. As reported, without adjusting the 2004 kilowatt-hour sales, commercial sales in 2005 increased 3.6 percent, and industrial energy sales decreased 2.2 percent.

Total sales of electricity to Southern Company's customers in the Southeast, including wholesale sales, increased 2.3 percent in 2005, compared with 2004.

In conjunction with this earnings announcement, Southern Company has posted on its Web site detailed financial information on its fourth quarter and 2005 performance. These materials are available at 7:30 a.m. EST Jan. 26 at http://www.southerncompany.com/.

Southern Company's financial analyst call will be at 1 p.m. EST Jan. 26, at which time Ratcliffe and Chief Financial Officer Tom Fanning will discuss earnings and earnings guidance as well as a general business update. Investors, media and the public may listen to a live Webcast of the call at http://www.southerncompany.com/. A replay of the Webcast will be available at the site for 12 months.

With 4.2 million customers and more than 40,000 megawatts of generating capacity, Atlanta-based Southern Company is the premier super- regional energy company in the Southeast and a leading U.S. producer of electricity. Southern Company owns electric utilities in four states and a growing competitive generation company, as well as fiber optics and wireless communications. Southern Company brands are known for excellent customer service, high reliability and retail electric prices that are 15 percent below the national average. Southern Company has been ranked the nation's top energy utility in the American Customer Satisfaction Index six years in a row. Southern Company has more than 500,000 shareholders, making its common stock one of the most widely held in the United States. Visit the Southern Company Web site at http://www.southerncompany.com/.

Forward Looking Statements Note:

Certain information contained in this release is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning results of operations, customer growth and Southern Company's strategies. Southern Company 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 Company; accordingly, there can be no assurance that such suggested results will be realized.

The following factors, in addition to those discussed in Southern Company's Annual Report on Form 10-K for the year ended Dec. 31, 2004, and subsequent securities filings, could cause results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and implementation of the Energy Policy Act of 2005, and also changes in environmental, tax and other laws and regulations to which Southern Company and 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 the pending EPA civil actions against certain Southern Company subsidiaries, FERC matters, IRS audits and Mirant-related matters; the effects, extent and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate; variations in demand for electricity and gas, including those relating to weather, the general economy and population and business growth (and declines); available sources and costs of fuels; ability to control costs; investment performance of Southern Company's employee benefit plans; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations; the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities; 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 Company or its subsidiaries; the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due; the ability to obtain new short- and long-term contracts with neighboring utilities; the direct or indirect effect on Southern Company's business resulting from terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company's and its subsidiaries' credit ratings; the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, floods, hurricanes or other similar occurrences; the direct or indirect effects on Southern Company's business resulting from incidents similar to the August 2003 power outage in the Northeast; and the effect of accounting pronouncements issued periodically by standard-setting bodies. Southern Company and its subsidiaries expressly disclaim any obligation to update any forward-looking information.

Southern Company 2006 Business Outlook Strategy focused on the business, markets and customers we know best 1. Regulated retail business - Transmission, distribution and over 35,000 MW of regulated generation within our five operating companies. - More than 4 million utility customers in Alabama, Georgia, Florida and Mississippi. - Annual revenues of approximately $13 billion and over 25,000 employees. - Average long-term demand growth in our service territory projected to be 2.0 percent. - Average long-term customer growth projected to be 1.8 percent. 2. Competitive wholesale generation business - Focused on competitive wholesale energy business in the Super Southeast. - Competitive generation net income includes Southern Power Company's results in addition to the wholesale businesses embedded in our regulated operating companies. - 5,465 MW of capacity owned by Southern Power Company. Goals for our Major Businesses 1. Lead the industry in service and customer satisfaction. 2. Earn superior risk adjusted returns. 3. Earn net income of at least $300 million from the company's competitive wholesale generation business by 2007. Financial Goals for the Company 1. Earnings per Share Growth - 5% long-term growth target. 2. Return on Equity - top quartile of electric utilities. 3. Dividend Growth - consistent with our long-term earnings per share objectives. 4. Credit Quality - maintain a solid A credit rating and a 40 percent equity ratio. Projected Sources and Uses of Funds from 2006 to 2008 Sources 2006-2008 ($Billions) Net Operating Cash Flow $10.4 Equity Issuances 0.5 Net Debt and Preferred 2.3 $13.2 Uses Capital Expenditures: $9.6 Detailed Breakout Page 6 Common Dividends 3.6 $13.2 Projected Capital Expenditures 2006-2008 ($Billions) Regulated Infrastructure Fossil/Hydro Retrofits $0.9 Environmental 3.1 Nuclear Fuel & Retrofits 0.6 Transmission & Distribution 3.3 All Other 0.5 Total Regulated Infrastructure $8.4 Competitive Generation 1.1 Products/Services & Other 0.1 Total Capital Expenditures $9.6 Credit Ratings S & P Moody's Fitch Senior Commercial Senior Commercial Senior Commercial Unsecured Paper Unsecured Paper Unsecured Paper Alabama Power A A-1** A2 P-1** A+ F-1** Georgia Power A A-1* A2 P-1* A+ F-1* Gulf Power A A-1* A2 P-1* A F-1* Mississippi Power A A-1* A1 P-1* AA- F-1* Savannah Electric A A-1* A2 P-1* - - Southern Power BBB+ A-2 Baa1 P-2 BBB+ F-2 Southern A- A-1 A3 P-1 A F-1 Company Southern Co. Svcs A*** * Commercial Paper issued through Southern Company Funding Corporation ** Alabama Power can issue commercial paper through the Southern Company Funding Corporation or through its own commercial paper program. *** Corporate Credit Rating Forward-Looking Statement Disclosure:

All of the information contained in this Business Outlook is forward- looking information based on current expectations and plans that involve risks and uncertainties. Southern Company 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 Company; accordingly, there can be no assurance that such suggested results will be realized.

The following factors, in addition to those discussed in Southern Company's Annual Report on Form 10-K for the year ended Dec. 31, 2004 and subsequent securities filings, could cause results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and implementation of the Energy Policy Act of 2005, and also changes in environmental, tax and other laws and regulations to which Southern Company and 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 the pending EPA civil actions against certain Southern Company subsidiaries, FERC matters, IRS audits and Mirant-related matters; the effects, extent and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate; variations in demand for electricity and gas, including those relating to weather, the general economy and population and business growth (and declines); available sources and costs of fuels; ability to control costs; investment performance of Southern Company's employee benefit plans; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations; the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities; 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 Company or its subsidiaries; the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due; the ability to obtain new short- and long-term contracts with neighboring utilities; the direct or indirect effect on Southern Company's business resulting from terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company's and its subsidiaries' credit ratings; the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes or other similar occurrences; the direct or indirect effects on Southern Company's business resulting from incidents similar to the August 2003 power outage in the Northeast; and the effect of accounting pronouncements issued periodically by standard-setting bodies. Southern Company and its subsidiaries expressly disclaim any obligation to update any forward-looking information.

Southern Company Financial Highlights (In Millions of Dollars Except Earnings Per Share) 3 months ended 12 months ended December December 2005 2004 2005 2004 (Notes) (Notes) (Notes) (Notes) Consolidated Earnings- (See Notes) Retail Business $90 $122 $1,251 $1,200 Competitive Generation 62 44 270 220 Total 152 166 1,521 1,420 Synthetic Fuels 12 14 85 74 Leasing Business 7 5 27 24 Parent Company and Other (12) (5) (42) (10) Net Income - Excluding One-Time Items (See Notes) $159 $180 $1,591 $1,508 Net Income - As Reported $159 $204 $1,591 $1,532 Basic Earnings Per Share - (See Notes) - Excluding One-Time Items $0.21 $0.24 $2.14 $2.04 - As Reported $0.21 $0.27 $2.14 $2.07 Operating Revenues $3,287 $2,670 $13,552 $11,729 Average Shares Outstanding (in millions) 742 741 744 739 End of Period Shares Outstanding (in millions) 742 742 Significant Factors Impacting EPS (See Notes) (Excluding One-Time Items) 3 months ended December 12 months ended December 2005 2004 Change 2005 2004 Change Consolidated Earnings- $ 0.21 $ 0.24 $ (0.03) $ 2.14 $ 2.04 $ 0.10 Significant Factors: Retail Business (0.04) 0.06 Competitive Generation 0.02 0.06 Synthetic Fuels - 0.01 Parent Company and Other (0.01) (0.03) Total $ (0.03) $0.10 Notes - Southern Company GAS completed the sale of substantially all of its assets on January 4, 2006 and is included in consolidated earnings in all periods as discontinued operations. - Excludes a one-time after tax gain of $24 million in December 2004 from the resolution of an IRS audit for the years 2000 and 2001. - For 3 months ended December 2005 and 2004, diluted earnings per share are not more than 1 cent per share and are not material. For 12 months ended December 2005 and 2004, diluted earnings per share are (1) cent per share. - Certain prior year data has been reclassified to conform with current year presentation. - Information contained in this report is subject to audit and adjustments and certain classifications may be different from final results published in the Form 10-K. Southern Company Analysis of Consolidated Earnings (In Millions of Dollars) 3 months ended 12 months December ended December 2005 2004 Change 2005 2004 Change Income Account- Retail Revenue $2,666 $2,195 $471 $11,162 $9,732 $1,430 Wholesale Revenue 429 303 126 1,667 1,341 326 Other Electric Revenues 125 105 20 446 392 54 Non-regulated Operating Revenues 67 67 - 277 264 13 Total Revenues 3,287 2,670 617 13,552 11,729 1,823 Fuel and Purchased Power 1,391 909 482 5,226 4,038 1,188 Non-fuel O & M 1,020 981 39 3,511 3,294 217 Depreciation and Amortization 300 238 62 1,176 949 227 Taxes Other Than Income Taxes 175 153 22 680 627 53 Total Operating Expenses 2,886 2,281 605 10,593 8,908 1,685 Operating Income 401 389 12 2,959 2,821 138 Other Income, net (23) (7) (16) 4 (10) 14 Interest Charges and Dividends 203 179 24 777 697 80 Income Taxes 21 (1) 22 595 585 10 Discontinued Operations, net of tax 5 - 5 - 3 (3) NET INCOME AS REPORTED (See Notes) $159 $204 $(45) $1,591 $1,532 $59 NET INCOME EXCLUDING ONE- TIME ITEMS $159 $180 $(21) $1,591 $1,508 $83 Kilowatt-Hour Sales (In Millions of KWHs) 3 months ended December 12 months ended December As Adjusted (See Notes) 2005 2004 Change 2005 2004 Change Kilowatt-Hour Sales- Total Sales 46,492 45,217 2.8% 196,877 192,382 2.3% Total Retail Sales- 37,518 37,057 1.2% 159,076 157,143 1.2% Residential 11,445 10,747 6.5% 51,081 49,702 2.8% Commercial 12,354 12,273 0.7% 51,857 51,102 1.5% Industrial 13,476 13,786 -2.2% 55,141 55,333 -0.3% Other 243 251 -3.0% 997 1,006 -0.9% Total Wholesale Sales 8,974 8,160 10.0% 37,801 35,239 7.3% 3 months ended December 12 months ended December As Reported (See Notes) 2005 2004 Change 2005 2004 Change Kilowatt-Hour Sales- Total Sales 46,492 45,217 2.8% 196,877 192,382 2.3% Total Retail Sales- 37,518 37,057 1.2% 159,076 157,143 1.2% Residential 11,445 10,747 6.5% 51,081 49,702 2.8% Commercial 12,354 12,020 2.8% 51,857 50,036 3.6% Industrial 13,476 14,039 -4.0% 55,141 56,399 -2.2% Other 243 251 -3.0% 997 1,006 -0.9% Total Wholesale Sales 8,974 8,160 10.0% 37,801 35,239 7.3% Notes - Southern Company GAS completed the sale of substantially all of its assets on January 4, 2006 and is included in consolidated earnings in all periods as discontinued operations. - Includes a one-time after tax gain of $24 million in December 2004 from the resolution of an IRS audit for the years 2000 and 2001. - In 2005, some Georgia Power industrial customers were reclassified from industrial to commercial to be consistent with the rate structure approved by the Georgia Public Service Commission. For presentation purposes, the "As Adjusted" chart reclassifies 2004 KWHs for commercial and industrial customers to be consistent with the 2005 presentation. - Certain prior year data has been reclassified to conform with current year presentation. - Information contained in this report is subject to audit and adjustments and certain classifications may be different from final results published in the Form 10-K. Southern Company Financial Overview (In Millions of Dollars) 3 months ended December 12 months ended December 2005 2004 %Change 2005 2004 %Change Consolidated - Operating Revenues $3,287 $2,670 23.2% $13,552 $11,729 15.5% Earnings Before Income Taxes 175 203 -14.4% 2,186 2,114 3.4% Net Income 159 204 -22.3% 1,591 1,532 3.8% Alabama Power - Operating Revenues $1,135 $971 16.8% $4,648 $4,236 9.7% Earnings Before Income Taxes 106 117 -9.3% 817 818 -0.1% Net Income Available to Common 57 66 -14.3% 508 481 5.6% Georgia Power - Operating Revenues $1,583 $1,237 28.0% $6,632 $5,371 23.5% Earnings Before Income Taxes 97 106 -9.1% 1,147 1,038 10.5% Net Income Available to Common 60 71 -15.8% 715 658 8.7% Gulf Power - Operating Revenues $264 $235 12.4% $1,084 $960 12.9% Earnings Before Income Taxes 5 1 330.7% 121 108 11.9% Net Income Available to Common 2 0 295.9% 75 68 10.2% Mississippi Power - Operating Revenues $228 $209 9.0% $970 $910 6.5% Earnings Before Income Taxes 5 5 7.0% 122 131 -7.1% Net Income Available to Common 3 2 48.5% 74 77 -3.9% Savannah Electric - Operating Revenues $109 $86 27.1% $445 $357 24.7% Earnings Before Income Taxes 2 2 -12.5% 50 40 23.7% Net Income Available to Common 1 1 24.4% 30 24 23.5% Southern Power - Operating Revenues $213 $154 38.5% $781 $701 11.4% Earnings Before Income Taxes 44 42 4.5% 187 184 1.2% Net Income Available to Common 27 25 10.9% 115 112 2.9% Notes - Southern Company GAS completed the sale of substantially all of its assets on January 4, 2006 and is included in consolidated earnings in all periods as discontinued operations. - Certain prior year data has been reclassified to conform with current year presentation. - Information contained in this report is subject to audit and adjustments and certain classifications may be different from final results published in the Form 10-K.

First Call Analyst: FCMN Contact: mjrice@southernco.com