David Ratcliffe, Chairman and Chief Executive Officer Tom Fanning, Chief Financial Officer

Danieale Sykes, Diamond Rose Leslie Rich, Columbia Management Greg Gordon, Citigroup David Schanzer, Janney Montgomery Scott Scott Lingstorm, Satellite Asset Management Paul Ridzon, Keybanc Nathan Judge, Atlantic Equities Vic Khaitan, Deutsche Rudie Toluntino, Prudential Equity Group Paul Patterson, Glenrock Associates Rosemary Tavalo, Tavalo Associates Ashar Khan, SAC Capital Amit Sanghrajka, Banc of America Securities Terran Miller, UBS

David Ratcliffe, Chairman and Chief Executive Officer: Thank all of you for joining us. I'm pleased to be with you for our fourth quarter earnings call. Joining me today is Tom Fanning, our Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. There are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent SEC filings. As you can see from the materials we released this morning, we had a good quarter and a very strong year. It's clear that our strategy is benefiting our investors as well as our customers. Our generation planning results and a lower priced fuel mix with coal, nuclear, and hydro comprising 90% of the fuels we utilize. We are continuing to make capital investments to help ensure reliable supply of electricity. And third, we continually focus on customer service and satisfaction. These are the three components of our business model. Investing in our infrastructure, keeping prices below the national average, and taking care of customers, all of which help maintain a constructive regulatory environment. We certainly had our share of challenges last year. For us, 2005 will always be remembered as the year of the hurricane. In the days following the storm, the Southern Company family came to the aid of our customers on the Gulf Coast with an unprecedented response and restored electricity within 12 days. As we turn over 2005 on the calendar, the efforts of our employees and those who assisted us from other parts of the United States will never be forgotten. I'm pleased to note that the electric utility industry took note of our response to these storms. Four of our operating companies recently received awards from the Edison Electric Institute. In addition to these awards, we received national recognition in the news media for our efforts on behalf of our customers. In addition to hurricane Katrina, there were other noteworthy events that occurred last year. In our regulated businesses, we completed fuel recovery cases in Alabama, Georgia, and Mississippi. Storm cost recovery plans were also implemented at Gulf Power and at Alabama Power. Gulf Power and Mississippi Power are working with their commissions on storm recovery costs, and we expect a constructive outcome in these discussions. I believe the successful outcome of these proceedings reflects the constructive regulatory environment that currently exists in all of our jurisdictions. We never take this working relationship for granted. In an environment of increasing costs, such as exists in the United States today, we must be diligent in controlling expenses as we continue to provide affordable and reliable service. A competitive generation business also completed a very successful 2005. We added to our generation assets in the state of Florida last year through the purchase of the Oleander facility and extended major contracts with Florida Power and Light and Progress Energy Florida. In addition, the contracts we signed last year with the Piedmont Municipal Power Authority in South Carolina are now being implemented. The progress we've made in the wholesale business should help us meet the goal of achieving $300 million in net income from this business by 2007. While our primary business continues to be that of a traditional electric utility, our vision of the future is anything but ordinary. Last year Southern continued its leadership position in the nation's development of clean coal technologies. Our integrated gas combined cycle project, or IGCC is on schedule for commercial operation in the summer of 2010. Southern Company, along with our partners at the Department of Energy, the Orlando Utilities Commission, and Kellogg, Brown & Root, will construct a 285 megawatt facility in central Florida that will utilize coal in a cost efficient and environmentally compatible manner. We're also moving forward to develop the next generation of nuclear plants. We've notified the NRC of our intent to apply for an early site permit this year and a combined construction and operating license in 2008. Work is currently underway to meet the schedule for both of these applications. 2005 was indeed a memorable year. Now to review the financial performance for 2005 and to provide earnings guidance for 2006, I'll turn the call over to Tom Fanning, our Chief Financial Officer. Tom Fanning, Chief Financial Officer: Thank you, David. As you mentioned, we had a solid quarter and an outstanding year. I'll discuss the specific reasons why in a moment, but first, let's review our numbers compared to the prior year. In the fourth quarter of 2005 we reported $0.21 a share. That's a decrease of $0.06 per share from the fourth quarter of 2004. However, in the fourth quarter of 2004, we had a positive $0.03 per share of one-time items stemming from tax related matters. With the exclusion of these one-time items, our earnings in the fourth quarter of 2005 were actually only $0.03 a share below the fourth quarter of 2004. And as we told you in our third quarter earnings call, we were able to catch up on some of our operations and maintenance initiatives. For the full year, we earned $2.14 a share. That's an increase of $0.07 a share over the prior year. Again, our net income for 2004 included the positive impact of $0.03 a share in one-time tax items. Excluding the impact of these one-time items, our results for 2005 exceeded the prior year by $0.10 a share, or $2.14 a share in 2005 compared with $2.04 a share in 2004. Now let's turn to the major factors that drove our numbers for the full year compared with 2004. First, I'll cover the negative factors. Here's the breakdown. Non fuel O&M in the retail business decreased our earnings by $0.14 a share in 2005 compared with the prior year. This is due primarily to increased spending to meet continued growth in the southeast as well as the completion of certain O&M projects that were carried forward from 2004. Errant company and other expenses reduced our earnings by $0.03 a share. This reduction was due primarily to storm-related costs and other corporate items. So, total negative factors reduced our earnings by $0.17 a share in 2005. Now let's turn to the positive factors that drove our earnings. Continued customer growth, increased consumption among residential and commercial customers, and market-driven revenue increases in the industrial segment added $0.16 a share to our earnings. Marginally warmer weather in 2005 compared with the prior year added $0.03 a share to our earnings. The weather in 2005 was normal while the weather in 2004 was milder than normal. Including with our retail business, the net impact of regulatory changes in Georgia added $0.01 a share to our earnings for the year. Our competitive generation business added $0.06 a share to our earnings for 2005. This increase is due largely to new contracts with Electric Member Cooperatives in the southeast, starting from the Oleander facility we purchased in 2005, and excellent performance from our asset optimization effort. Net income from competitive generation totaled $270 million in 2005. Finally, our syn fuels business added $0.01 to our earnings. So overall, our year came in at $2.14, on increase of $0.10 a share over 2004, excluding the $0.03 of one time items. Before we turn to guidance for 2006 I would like to update you on several key business and financial issues. As I indicated earlier, strong demand for electricity and sustained economic growth in the southeast continued to be major contributors to our earnings. On the industrial side, automobile manufacturing, steel, lumber, and paper were the major drivers of economic growth in the fourth quarter. One of our largest industrial customers, the Chevron refinery near Pascagoula, Mississippi is now back to pre-hurricane production levels and expects to build a liquefied natural gas terminal next to the refinery. Personal income growth in the region is nearly 3.6% compared with 2.5% for the U.S., which helps drive the purchase and use of new appliances and other household items. In addition, we're seeing continued growth in building permits, counter to the national trend of a slowdown in housing. Employment increases in both Alabama and Georgia continue to be strong. Georgia added more than 67,000 jobs last year while employment in Alabama is close to its previous peak set in 2000. The influx of new residents to our service territory is the highest since 1998. For example, nearly 80,000 new residents moved to Georgia last year. Finally, the Mississippi Gulf Coast is showing a strong recovery. It is now projected that a majority of casinos in Gulfport/Biloxi area will be reopened at least in a temporary condition by the end of this summer. The recovery along the Mississippi Gulf Coast is well underway. As you may have seen in the business outlook section of the earnings package, we have released an updated capital budget for 2006 through 2008. Our largest capital area continues to be transmission and distribution with a projected expenditure of 3.3 billion for the three-year period. And our CapEx related to environmental is now projected to grow significantly over the next three years. We are entering a period of significant capital investments in scrubbers, SCRs, and baghouses at our larger coal fired plant. During the three-year period through 2008 we are planning to invest approximately 3.1 billion in these environmental upgrades. This investment, which is expected to peak in 2007, should enable us to continue utilizing our coal-fired fleet, helping keep prices below the national average and minimizing the impact on the environment. Turning now to regulatory issues, I want to update you on some matters we have pending at the Federal Energy Regulatory Commission. The first item concerns the market power case which is currently before FERC. Our objective in this hearing is to present analyses that will enable FERC to make a reasoned decision on the question of whether we have generation market power in our control area. We think we have a strong case because so much of our generation is committed to serving our retail and wholesale native load customers. FERC staff and one intervenor have taken initial positions to the contrary. The case is currently pending before an administrative law judge, and it will probably be late this year or early next year before the judge issues her decision. The other matter before FERC concerns the inter-company interchange contract. We are currently engaged in constructive discussions with the staff. As a result of these discussions, FERC has suspended the hearings while granting all parties in the case additional time to work toward a settlement. We are hopeful that this case can be settled without a formal proceeding at the commission. Let's turn now to our earnings guidance for 2006. As you may recall last May in our analyst meeting we presented a financial plan outlining a 5% annual growth in our earnings range for 2005, 2006, and 2007. Our plan assumes a return on equity of 13.5% for the retail regulated business and continued progress in our net income goal of 300 million for the competitive generation business. In 2005, we made 13.8% and 270 million respectively from these businesses. An excellent result. For 2006 and 7, we will continue to target a corporate return on equity of 13.5% for the retail regulated business. With the contract we currently have in place in our competitive generation business and with about 10 million in initiatives at Southern Power we expect to earn approximately $285 million in this business in 2006. So the plan we outlined last May to get 5% earnings per share growth remains the same. On average, we still forecast approximately 3.4% earnings per share growth from our retail regulated business with the remaining 1.6% driven by growth in our competitive generation business. With earnings per share growth of 5%, our plan is to grow the dividend at approximately 4%. As our payout ratio declines and accounting for the expiration of syn fuel earnings we'll continue to evaluate whether to recommend to the Board increasing the rate of growth and dividends per share to match the long-term rate of growth in our earnings per share. For 2005, we provided a guidance range with and without syn fuel earnings. For 2005, our range was $1.93 to $1.98 a share without syn fuel. Then, after adding $0.11 a share for syn fuel earnings, the range we provided for 2005 was $2.04 to $2.09 per share. For 2006 we are starting with the range without syn fuel of $1.93 to $1.98 a share and adding an EPS growth target of 5%. This calculation results in an earnings range for 2006 of $2.03 to $2.08 without accounting for syn fuel earning. Then, adding $0.12 a share for the full value of syn fuel, our estimate for 2006 is $2.15 to $2.20 a share. Again, that range for 2006 is $2.15 to $2.20 a share, including the full value of projected syn fuel earnings. So to emphasize our earnings guidance for 2006 is consistent with the 5% growth plan we showed you last spring. Without syn fuel we project earnings per share to be between $2.03 and $2.08 per share. Including syn fuel earnings this range is projected to be between $2.15 and $2.20 per share. Finally, to complete our discussion of earnings for this year, our estimate for the first quarter of 2006, including syn fuel, is $0.38 per share. Now, this estimate is lower than what you might have expected. However, we will expense stock options in the first quarter this year, which will decrease our earnings by approximately $0.02 a share during the quarter this is the first time we will have expensed stock options, so this will be an ongoing item with most of the impact seen in the first quarter. At this point I will turn it back to David for his closing remarks. David Ratcliffe, Chairman and Chief Executive Officer: Thanks, Tom. As you've just heard our businesses are performing very well. The population and the economy here in the southeast continue to expand, and as a result we look forward to another excellent year. Our main priority this year is to continue successful execution of our business strategy. On the retail side we have no major base rate case actions scheduled for 2006. We will move forward with the merger of Savannah Electric into Georgia Power which we expect to complete by July. Also in Georgia, we will have a fuel filing in March, and in Mississippi we expect to complete certain other rate matters. On the competitive generation side of our business we have demonstrated our ability to grow this business and meet our financial targets. Our goal is to extend our track record in this area. In conclusion, our focus will continue to be on reliability, price, and customer satisfaction, while at the same time providing our shareholders with attractive risk adjusted returns. I'm confident that we have the team in place to deliver these goals. At this point Tom and I will be happy to take any questions you might have. We'll now take the first question. Questions & Answers:

Q - Danieale Sykes: Good afternoon. Just wanted to ask you, has there been any estimate on the type of synergies you will be expecting from the merger? Because I would assume that there will be some economies of scale that you could get. A - Tom Fanning: Between Savannah and Georgia? Q - Danieale Sykes: Right. A - Tom Fanning: Yes. Hey, Danielle. Thanks for calling in. Q - Danieale Sykes: Hi. A - Tom Fanning: Hey. We've already assumed the fact that synergies will account for, really between now and next year will account for all of the transition costs that we will incur. We are not giving any of our companies, particularly Georgia Power in this case, any relief from its target of a 13.5% ROE objective. So in essence, we're assuming that we're going to make up for any transition costs with synergies. Q - Danieale Sykes: And I'm assuming also that the economies will develop over time. They might not be immediate. A - Tom Fanning: Yes, but we're going to basically, yes, we're going to account for them over two years, but in fact, Georgia is going to seek to achieve its return objectives even accounting for any transition cost they incur this year. Q - Danieale Sykes: Okay. A - David Ratcliffe: I think the other thing, Danielle, is to remember that in the Georgia jurisdiction, Georgia will file a case under the current accounting order in 2007, so they will plan to file in July of 2007. That determination will be made by the end of 2007 with the outcome implemented in 2008. So what they will be filing will be the combined Georgia and Savannah numbers. Q - Danieale Sykes: I see. You are anticipating 1.1 billion of long-term capital expenditures in the competitive area. How much of that is maintenance, and how much is new projects? A - Tom Fanning: Yes, most of that is a place holder. Q - Danieale Sykes: Okay. A - Tom Fanning: When you look at it, between '06 and '08, you should expect kind of normal CapEx associated with maintenance for the plants. They have to be somewhere around, I don't know, $30 million a year, something like that. So that leaves about 975 of place holders. I might add that you may be aware that we're interested in thinking about at least investing in some renewables. We have included in that kind of 975 number about 250 million of place holders for those kinds of investments. But in essence, as we've said before, those are, in fact, place holders, and whether we invest them or not depends on whether we get projects that meet our rather conservative and disciplined financial criteria. Q - Danieale Sykes: There is no mandatory levels yet for renewables in your region? A - Tom Fanning: That is correct. Q - Danieale Sykes: Okay. Thank you. A - Tom Fanning: Thank you. Appreciate it.

Your next question comes from Leslie Rich with Columbia Management. Q - Leslie Rich: Hello. A - Tom Fanning: Hey, Leslie. How are you? Q - Leslie Rich: Great. On your environmental spend… A - Tom Fanning: Yes. Q - Leslie Rich: Could you remind me of your recovery mechanisms? And I'm not sure which jurisdictions, if that's mostly allocated to Georgia and Alabama? A - Tom Fanning: You bet. Glad to do it. We have three of our states, Alabama, Mississippi, and Florida, all have provisions and rates for recovery of environmental expenditures. Alabama just put theirs in place last year. I might add that Georgia, as a practical matter, contemplates a forward spend on environmental when it sets its three-year accounting orders every three years. So in essence, all of our companies have either an accounting order or a mechanism in place currently that allows for contemplated recovery of environmental. Now, with respect of what share of environmental is born by what company, over the three-year period 2006 to 2008, we look at about 3.1 billion. Alabama is about 1.1 billion, Georgia is about 1.6, Gulf about 300 million, and the balance taken up at the rest of the Company. Q - Leslie Rich: Okay. So that's already on the planning board. And underway. A - Tom Fanning: Yes. Q - Leslie Rich: And then industrial demand, I saw that it was down in the quarter. I'm not sure if that was because of hurricane-related issues, perhaps with Chevron's refinery or if that was indicative of any other sort of….. A - Tom Fanning: You got it. That's it. In fact, if you adjust for the hurricanes, industrial sales probably would have been up about 0.8%, something like that. So it would have been right on our target, had the hurricanes not existed. And you may know that we're pretty happy with the recovery of the industrial sector, particularly along the Mississippi Gulf Coast. We mentioned Chevron, we mentioned the fact that they're adding an LNG terminal, and I guess the last customer to turn on is probably going to turn on in the first quarter here, I guess that would be DuPont. So we feel very positive about the recovery of industrial loads in that area. Q - Leslie Rich: A - Tom Fanning: Thank you.

Your next question comes from Greg Gordon of Citigroup. Q - Greg Gordon: Thanks. Good afternoon, gentlemen. A - Tom Fanning: Hey, Greg. Q - Greg Gordon: You were very careful in explicitly delineating that your earnings guidance includes the full benefit of syn fuel. Can you talk with us about how we deal with the fact that oil prices are where they are and whether or not that impacts your decision to run the business, to curtail production, how those earnings might or might not phase out and impact that guidance? A - Tom Fanning: Yes, beautiful. I guess the first issue that we're kind of hopeful about is that we believe in one of the reconciliation bills, it's kind of moving through Congress, is there is a possibility of including essentially a look-back provision on the oil price that will determine the extent to which you are entitled to receive tax credits, right? We believe that the, if, in fact, that is passed that we'll have certainty, we think, for 2006, which would provide for a full recovery, or full entitlement to syn fuel tax credits for this year. With gas, with oil prices being where they are now, they're frankly fairly close to our break even rate for the year. And so we're watching that very closely, and certainly working with our partners should we feel that it's prudent for us to stop production we will do that. So something we're looking at. Q - Greg Gordon: Okay. So if we assumed that the market froze at the current oil price and just stayed at that price for the rest of the year, and you didn't get a change in the tax code, you would, there would be an economic decision to not run? A - Tom Fanning: We're close to it, we're pretty close to it. Q - Greg Gordon: Okay. All we do is present value, the value of tax credits. So what's left, there's not a lot. I wanted to make sure I understood what was in your guidance and how you're thinking about that. A - Tom Fanning: That's right. Just to give you a little more granularity there, I think what we see is something like, is it $67 currently right now, and 69 is kind of our break even point. So that's kind of where we are there. And our own calculations, it's somewhere less than $0.20 a share on whatever it is now, about $0.35, $0.30 or something share price. Q - Greg Gordon: But the MVP of the cash from those credits? A - Tom Fanning: Exactly. Q - Greg Gordon: The second question was CapEx, should we just assume 3.2 billion a year over the next three years or is it back end loaded? Can you give us an annual CapEx forecast? Because you've given us '06 to '08 numbers. A - Tom Fanning: Sure. Let's see. They're a little back end loaded. If I were to give you year by year, it kind of looks like 2.8 billion in '06, 3.6 billion in '07, that's the peak of our environmental spend we project right now, and then about 3.1, 3.2 in '08. Q - Greg Gordon: So when we look at the roll-ins or the rates, for the CapEx that you actually, in these jurisdictions, that will start ramping into revenues and earnings in the back half of '07 and into '08? Is that the right way to think about it? A - Tom Fanning: Yes. Alabama's mechanism that includes environmental spend is a forward looking mechanism. So there should be minimal lag there. But, yes, you're right. Q - Greg Gordon: So why, so 5% growth, I mean, I know you guys have stuck to that number for a long time. There's an economic tailwind here, and you've got a tailwind from all this rate-based growth. So is there, would there be reason for us to believe there's potentially in the short run, although not systematically, bias to the upside on that earnings growth rate? A - Tom Fanning: Well, I guess there's, we like to structure our financials in a conservative manner. We have since I've been around. We'd rather have more upside than downside. We still think, however, that 5%, when you think about the way it's structured, is a pretty aggressive objective for us to fulfill. I mean, for the retail regulated business to earn 13.5% these days is a pretty good accomplishment, from the competitive gen business, I think you can see that in 2005 we earned $270 million. So that's good. We think a lot of that performance was driven by high gas prices. Remember that, there again, we budget relatively conservatively, and we have upside structured in case we have high gas prices or we have other circumstances that work to our benefit. So we still believe the 5% objective is a good objective for '06. Q - Greg Gordon: All right, guys. I've taken enough of your time. Thank you. A - Tom Fanning: Thank you, Greg. Appreciate you calling in.

Your next question comes from David Schanzer with Janney Montgomery Scott. Q - David Schanzer: Yes, good afternoon. Listen, a couple of very quick minor questions but things I was interested in. First of all, your small C&I reclassification that you mention in your release, what kind of growth in small C&I quantity sales do you see now that it's been reclassified going forward? A - Tom Fanning: Well, that really just involved, I think it was in the, as a result of the last rate case in Georgia, people moving from one set of rates to another. Let me see about, hang on a sec. Let me see what difference that makes. Bear with me just a sec. I am guessing that we should look to see about, in line with our demand growth, about a 2% forward growth rate. Q - David Schanzer: Okay. A - Tom Fanning: Is what I would expect there. Q - David Schanzer: And you did give us a number on the effect of weather for the full year but do you by any chance have the effect on it for the quarter? A - Tom Fanning: Oh, sure. Yes. For the quarter, 2005 weather was up $0.01. Q - David Schanzer: Okay. And then lastly…… A - Tom Fanning: That's against the prior year. Q - David Schanzer: Yes. Then lastly, you point out that you expect to spend 3.1 billion from the period '06 to '08 for environmental expenditures. A - Tom Fanning: Yes. Q - David Schanzer: How much of that do you have tax exempt financing for, or do you plan to get tax exempt financing for? A - Tom Fanning: That's an issue we're working through right now. I can't give you an answer on that but it's something we're considering. Q - David Schanzer: Thanks. A - Tom Fanning: Thank you. Appreciate you calling.

Our next question comes from Scott Lingstorm (ph) of Satellite Asset Management. Q - Scott Lingstorm: Good afternoon. A question I had, Georgia on the sharing arrangement, my back of the envelope numbers looks like the financial ROE was actually higher in '05 than '04, and I know the ROEs were set a little bit lower and the sharing bracket as well. Did you get into the sharing range, and if so, how much? A - Tom Fanning: We're still working all that out. There will be a filing to be made later this spring, but we're right on the edge of that. And one of the things that benefited Georgia's ROE, remember when we think about competitive generation on, some of that is embedded, that is attributable to the retail regulated companies and some of that is attributable to Southern Power. Georgia Power benefited from some good wholesale sales. Q - Scott Lingstorm: Right. Yes, that's always the trick in looking at the financial ROE. Thanks, guys.

Your next question comes from Paul Ridzon of Keybanc. Q - Paul Ridzon: Do you put on any oil hedges to protect syn fuels or just kind of ride the market? A - David Ratcliffe: This year we do not have any hedges in place. Q - Paul Ridzon: And I assume '07 you don't either. A - David Ratcliffe: Correct. Q - Paul Ridzon: Thank you very much. A - David Ratcliffe: Thank you.

Your next question comes from Nathan Judge of Atlantic Equities. Q - Nathan Judge: Good afternoon, everyone. Just a quick question on page number 5. I just noticed something. You provide your funds from operations of 10.4 billion, and if I look at the third quarter release for the years 2005 to 2007, it's about $1 billion less. Now, I realize there's some drop-off of lower earnings in '05, and a pickup in '08, but $1 billion is quite a big swing. Could you just give me an idea of what's driving that change? A - Tom Fanning: Yes, it's recovery of fuel. Q - Nathan Judge: Okay. So a lot of that is coming from working capital, basically. A - Tom Fanning: Yes, and I guess the other piece is storm related. In fact, I could probably get that for you in total. Hold on just a sec. Just a sec. We have, we have, let's see, about 1.6 in total between the two. On fuel it's a little over 1 billion at year end. Most of that at Georgia Power. Q - Nathan Judge: Okay. A - Tom Fanning: And storm, it's the balance. So it would be 400 million or so. Q - Nathan Judge: Okay. And that fuel recovery increase has been put in place, so that should be coming back relatively shortly, should it not? A - Tom Fanning: Well, let's think about it. As of December Georgia Power had 750 million. Somewhere around 500 million of that was already spoken for in their fuel filing last year. The balance of that continues to grow. In other words, the fuel filing we made, prices continued to go up. Georgia anticipates probably another fuel filing later this year, probably in March. So we'll work to get that. The agreement that was struck in Georgia was a recovery over a four-year period. Q - Nathan Judge: Right. A - Tom Fanning: Alabama has 285 or so at year end. And that was, I think, struck as a two-year recovery period. Q - Nathan Judge: Okay. Fair enough. Thank you very much on that. Just on your competitive generation, it looks like it's gone up a couple hundred million dollars. I know you had some potential ideas, things in 2008 that might come on. Is that something new, or is that primarily some of the coal plants that you're building down in Florida, et cetera? A - Tom Fanning: Yes, the IGCC that you're referring to in Orlando is really due to come on between 2010 and 2011. What we're really looking for in project development in the southeast continues to be in the high attractiveness areas of the Carolinas and in Florida, and for the most part in the near term is probably driven by combined cycle gas-fire technology. So that's where we continue to see our growth. It may be, we had a real good asset optimization year in '05. We may get some of our numbers there. We may pursue some acquisitions, as we did with the Oleander deal last year. Is that $200 million increase in your, and again, that's a three-year period, so I understand it could be spread over several years, but is that $200 million accounted for on things that you've already discussed, or is it to be discussed in the future? Pretty much to be discussed in the future. Q - Nathan Judge: Okay. Fair enough. Just on competitive generation, could you just go through your optimization and how much you made from that portion of the business? A - Tom Fanning: Sure. Delighted to do that. Our budget for 2005 was around $38 million. We had a good year. We ended up making $59 million. Let me split that up for you a bit. Embedded, the part associated with the retail regulated businesses, we budgeted 18 and made 23, Southern Power we budgeted 18 made 36. So if you look at this kind of $21 million delta between budget and actual, it was really comprised of kind of two major areas. So that for us is about $0.03 a share. About $0.01 a share is associated with opportunity sales. Shouldn't surprise anyone that the margins available in the wholesale markets this year actually increased over 2004, if you just kind of want some round numbers there, remember that our energy mix is 90% driven by relatively inexpensive fuel sources. 70% coal, 16% nuclear, and 4 to 5% hydro with the balance being natural gas. When you think about the wholesale margins that clear in the southeast, that's largely combined cycle, natural gas driven. So once we satisfy the native retail load requirements in the southeast, if there's anything left over with that fuel mix, we can sell it profitably and the margins in 2004 were around $12.40 or so per megawatt hour. In 2005 they increased about 50% to $18.60 in round numbers. So an increase of 50% of the margin. When you think about your ability to hit that margin, our generating fleet performed admirably during the year. You know that our E-4 rates have been just terrific compared to national averages in the past, and, in fact, we had another excellent year where if you adjust for hurricanes, our equivalent forced outage rate for hydro was around 2.3%. So when you think about total production numbers, we actually were able to generate another 7 million megawatt hours out of our coal fleet. So our ability to run coal well translated into profitability from an opportunity sales standpoint. So that really helped us. I guess the other piece of our asset optimization floor was related to kind of unit performance bonuses that would relate to heat rate bonuses and availability bonuses. Q - Nathan Judge: Just a follow-on to that forced outage rate, which was probably one of the best that I've seen so far, but just with regard to implementing your environmental spend on these coal plants, how do you see that playing out over time, and is there opportunity to, I guess, not only sustain that but to get that down even lower? A - David Ratcliffe: Probably as we go forward with the process of installing additional equipment on the back end of the unit, you shouldn't expect the reliability to increase any on these units. I think we will be challenged to maintain the kind of forced outage rates that you see at this point in time. They are, to your point, very, very attractive and lead the industry, but you've got to believe that as you add more stuff on the back end, that's a considerable challenge going forward. Q - Nathan Judge: Is that going to take out available capacity that you would otherwise have? A - Tom Fanning: Only very marginally. A - David Ratcliffe: Yes, to the extent you have to have an outage to install your equipment, yes, but we'll try to make that a part of the planned maintenance schedule that we would do anyway. A - Tom Fanning: Yes. Q - Nathan Judge: Just last comment. Question is on your coal supply. I appreciate your comments. Thanks. A - Tom Fanning: Coal supplies are fine. We certainly have had, as I guess everybody around the United States has had some disruptions in delivery or production, but we feel that we're in good shape, and we'll be back to our kind of normal inventories by the beginning of the peak season, which is 30 days. So we're doing fine. Q - Nathan Judge: Thank you.

Your next question comes from Vic Khaitan of Deutsche. A - Tom Fanning: Hi, Vic. Q - Vic Khaitan: Hi, Tom, David. Just a question about this FERC's review of market power. It has been taking so long, so do you read into anything into that review? Or how do you feel about it? And does that prevent you from doing any further industry transaction or so? A - Tom Fanning: If I had to characterize the process, Vic, I guess I'm encouraged by how it's going. You may know that the last couple of weeks, Calpine gave notice of its intent to withdraw from the case. So in light of this development, Southern and FERC has filed a joint request to revise the schedule so that the staff could kind of supplement its testimony that otherwise would have been spoken for by Calpine. So what will happen as a result of these various filings, someone else may step in, we don't know, but at this juncture it's just kind of hard to tell. We've scheduled a pre-hearing to address everybody's arguments, in that regard, be around the end of this month. And in the meantime, a request by us for a two-week extension has been granted. So this allows some time for the judge to consider competing arguments and decide who is going to provide what testimony, but overall, I think our sense is that everyone is working in a constructive manner, and we look forward to the outcome. A - David Ratcliffe: Remember, Vic, we said I think in our prepared remarks that what we've been trying to convince FERC of since we began this process is that because of the tremendous amount of commitment we had to retail native load and wholesale commitments, that has to be taken into account when you're calculating whatever form of market power determination you intend to use. So we've been trying to convince FERC that there's a better way to look at this. I think that's beginning to settle in, so we're optimistic about our ability to move through these two proceedings. Q - Vic Khaitan: David, on the bigger question, do you see Southern becomes active in margin consolidation on a general basis, without commenting anything specific? A - Tom Fanning: You're talking the broad M&A question here? Q - Vic Khaitan: Yes. A - Tom Fanning: With one slight modification, we are where we were, and that is, let me just review for everyone that may not know. We have relatively conservative criteria, I suppose, and that is we want to, anything we do has got to accrete to shareholder value. That's the beginning point. And therefore, the way we translate that is we want to contribute positively to our 5% growth objective. We want to be accretive in a matter of months, not years. We think our stock trades as much on its low risk profile as it does its attractive return, and therefore we want to be credit neutral, and then we want to be faithful to our strategy. Now, we have said in the past our super southeast strategy. Let me assure everyone that we remain focused on the southeast, but I think we just want to make that slight refinement just to give recognition to the fact that the repeal of the 35 Act causes us to at least look a little further. We have looked at this stuff, we continue to look at it, but I think we'll be exceedingly disciplined. Let me just add one more comment about geography. It's always a challenge when you consider M&A to achieve synergies in order to pay for the premiums of the acquired company. Certainly it is our belief that companies in close proximity from a geographic standpoint enhances your ability to obtain those synergies. But please understand that we still believe in the synergy likelihood of geographically proximate companies. But we are willing to expand our reach just a bit further, expand our look. We still believe we've got the scale we need. We don't feel compelled to move, so I hope that answers your question. Anything else you want to cover there? Q - Vic Khaitan: No, thanks for the answer. Thank you.

Your next question comes from Rudie Toluntino with Prudential Equity Group. Q - Rudie Toluntino: Hi, Tom. A - Tom Fanning: Hey, Rudy, how are you? Q - Rudie Toluntino: Doing well, thank you. Just had a quick question about your dividends. You mentioned that you're going to continue to grow at essentially 4%. Does that include, with or without any impact to syn fuel? A - Tom Fanning: We have accounted for not having syn fuel. Q - Rudie Toluntino: Okay. So essentially you intend to grow it at 4% then. A - Tom Fanning: That's the idea, yes. It is the same profile that we suggested last May. When we looked over what we would say about guidance, what we would say about dividend policy, and everything else, we essentially are just confirming what we told everyone last May. So we're right on that trajectory, right on that plan. Q - Rudie Toluntino: Okay. And that, because I remember the payout, you had that 70% payout ratio target. I guess that doesn't really apply in this case any more. A - Tom Fanning: Well, if you follow, if you let me just do the math we showed last May. If you grow earnings at 5%, and you grow the dividend at 4%, and then you reach a period kind of, I guess this is in 2008, where you don't have syn fuel, you could probably find yourself in a position where the payout ratio, if you increase to 5%, would be about 72.5. We think that's a reasonable range. Q - Rudie Toluntino: Okay. Thank you very much. A - Tom Fanning: Sure. Q - Rudie Toluntino: The next question comes from Paul Patterson of Glenrock Associates. Q - Paul Patterson: Good afternoon, guys. A - Tom Fanning: Hey, Paul. Q - Paul Patterson: I wanted to follow up on Greg and Paul's question on the syn fuels. The reconciliation bill, could you just elaborate a little bit more about this look-back provision and how that actually works? A - Tom Fanning: Yes. Essentially, remember that the calculation involves a reference price for oil. Q - Rudie Toluntino: Right. A - Tom Fanning: Which is designed to basically act as a proxy for determining the need for incenting the development of syn fuel products. Okay? The way it works is, essentially that number is calculated for '05 you won't know it until about the spring of '06. Q - Rudie Toluntino: Right. A - Tom Fanning: What the provision in the proposed legislation would do is essentially use that number that's calculated in the spring of '06 now, not just for '05, but also for '06. So you have certainty within the calendar year with respect to whether you're going to be able to earn the syn fuel credit. Q - Rudie Toluntino: Where is that bill right now in the legislative process? A - Tom Fanning: It's in conference. Q - Rudie Toluntino: It's in the conference committee? A - Tom Fanning: Yes. Q - Rudie Toluntino: And this is part of, this is a portion of the entire tax bill is that it? A - Tom Fanning: The tax reconciliation bill, that's right. Q - Rudie Toluntino: We'll see what happens there. In case that doesn't happen, though, we have the issue of what the actual cost of the tax credits is in case you, if you guys are planning on producing with the current price year, although it sounds okay, because the break-even is around 69, with the way it's sort of set up, if the price goes tremendously higher in the later part of the year and you guys have produced this, there's a possibility that you guys would actually have a loss that wouldn't be covered by the syn fuel tax credit benefit, correct? A - Tom Fanning: Sure. The way I think about it, at least for Southern Company is this. Remember the economic censure said that generally speaking you have an operating loss, and so you essentially earn credits, part of the credits essentially account for earning back the operating loss, and then whatever is left over after the operating loss goes to the bottom line as net income. Q - Paul Patterson: Right. What is the actual operating loss though? If you didn't have any of the credits, if for some reason they were to go away what is the cost of operating these plants without the credit? What's the impact in that case? A - Tom Fanning: What we would do is essentially this. We would monitor where the breakeven is. And if we get very close to the breakeven rate, we would probably recommend stopping production and kind of stopping the loss, if you will. So if I were just to project a number, if we stopped right now, that number might be around $8 million or something like that. In other words, if you didn't have any tax credits available, and you had an operating loss like right now, it would be about $8 million. If we did it at the end of the first quarter, for example, in other words, we continued producing through the end of the first quarter, and at the end of the day we got no tax credit, the operating loss would be about $29.5 million. Q - Paul Patterson: Okay. That's very helpful. Okay. And then, so that's how you guys, you guys are just going to monitor it, assuming that this reconciliation bill doesn't include this language, you guys will just monitor it, and obviously, and make your decision as time goes on, but with the reconciliation bill you don't even have this risk and you would be able to produce as much as you want. A - Tom Fanning: That's 100% right. I can assure you that we would take a conservative posture here. Q - Paul Patterson: And then finally on the parent expense, you mentioned $0.03 associated with the storm impact on the parent, the increase in parent expense but it looks like there was a bit more there. Could you elaborate on what you guys expect that to do in 2006 and what's causing it? A - Tom Fanning: Well, one of them, we made a donation to the Southern Company foundation and it equaled about $0.01. Probably the other $0.01 was associated with interest costs, things like that. Q - Paul Patterson: Okay. And then in 2006, I guess, other than the $0.03 associated with the storm impact, your 2006 guidance would have what, if we were back out that $0.03 it would pretty much stay flat? Is that the idea? A - Tom Fanning: Yes, I guess the only thing I would caution you is what would happen if interest rates between now and the end of the year. That would be the only swing. You're right, I mean, theoretically, if we don't have any more hurricanes, and therefore no hits on our captive insurance policy, and we didn't make a foundation contribution, then you wouldn't have those $0.02 there. Q - Paul Patterson: Okay. Then just finally on Leslie's question, just a follow-up and make sure I understood your answer to it, it sounds like you guys feel that hurricane, at least from the industrial perspective, you guys are pretty much back on line. What would you say, I mean, in terms of the recovery from the hurricane? Should we expect pretty much, you guys be pretty much okay? The impact of the hurricane to be pretty much not there in 2006? In terms of lost revenues or whatever. A - Tom Fanning: Yes, let's kind of go through that, because it's an interesting question, and something we really are looking hard at. First of all, let me just handle the cost recovery standpoint. We have proceedings already contemplated, Mississippi and Gulf and we think we're through our constructive relationship I think we're going to get treated well there. I think we're going to be treated fairly. Now let's go to kind of the ongoing economic impact. We've said before in Mississippi that we lost about 20,000 customers. I suggested at the last earnings call that from a, one of the things we like to look at is here is where are FEMA checks being sent. And what was suggested back then is that 80% of the FEMA checks associated with the loss of customers in Mississippi, 80% of them are to the same zip code in Mississippi. So that suggests that if people are displaced, they're still in Mississippi. They may be living in rental housing, relatives, FEMA, temporary housing, what have you. I have another statistic prepared for this earnings call. It's just an interesting number. When you look at the total number of applicants, actually people receiving FEMA assistance, if you add up all the zip codes in the Southern territory, you get something like 360,000 people receiving FEMA aid. Now, of course, some of those people are already in our territory, and so I don't know what the right number is in terms of what that suggests about the influx of people that have been displaced not only by Katrina in Mississippi, but also by the floods in Louisiana, Rita, and a variety of other things. But it does suggest that perhaps we're seeing net addition of people in our territory than before the storms hit. And I think we're gratified to see that even with this influx of people, our unemployment rates remain low, our economy seems to be able to assimilate this influx of people. So I don't know how long these people will stay, whether they will make it permanent, or whether they will move back, but it's an interesting outcome to contemplate. Q - Paul Patterson: Okay. Thanks a lot. A - Tom Fanning: Sure. Thank you.

Your next question comes from Rosemary Tavalo of Tavalo Associates. Q - Rosemary Tavalo: Good afternoon. A - Tom Fanning: Hey, Rosemarie. Q - Rosemary Tavalo: I notice that this big increase in competitive income brought you to $270 million. Now you did have the benefit of the Oleander addition, and as you mentioned, conditions were particularly favorable for your selling power this year with the good, with good productivity of your plant, et cetera, but it seems to me, I mean this is a $50 million increase. You're looking for 300 million by 2008. Might that be conservative? A - Tom Fanning: Well, we'll see. With the asset optimization side, you know that we like to maintain a conservative projection there. We just always have. We think it has more upside than downside, but that's the way we'd rather cast our financial plan. We don't believe in surprising our investors negatively. So if there is a bias, there's a little bit of a bias there. In terms of contracts, we're assuming for the year the full year of Oleander. We've had another major contract that helped us through '05 was the EMC-30 deal in Georgia. And in order to hit the numbers that we're looking at in kind of this $285 million number, assuming a relatively conservative budget for asset optimization, it looks like another 10 million of initiatives somewhere. That could be through the acquisition of another plant like Oleander, or something else. So that's kind of the construction of the estimate. Q - Rosemary Tavalo: You're estimating 285 for '06, and then you spring the rest for '07. A - Tom Fanning: Yes. Q - Rosemary Tavalo: Okay. A - Tom Fanning: And remember, and I just want to point out for everybody, remember I spent some time at the analyst conference last May, and I probably talked about it some on these earnings call since then. When we look at what do we need in order to hit 5% growth, I suggested that we didn't need 300 that we needed really somewhere around 275. That assumed that we had kind of this historical split between Southern Power and……. Q - Rosemary Tavalo: Retail. A - Tom Fanning: And retail, right. The embedded side. What you saw in 2005 was a little more allocated toward the embedded side. So I think we're on our track this 285 number is a good number for us to hit for 5% returns this year. Q - Rosemary Tavalo: Okay. Thank you. A - Tom Fanning: Sure. Thank you.

Your next question comes from Ashar Khan of SAC Capital. Q - Ashar Khan: Good afternoon. I have just a general question. David or Tom if you could address, people are starting with the nuclear construction, people have started thinking of sites, and people have started approaching legislatures in terms of trying to get bills in to try to get a recovery up-front. Before the, going for a rate case once the plant is built in. Could you just tell us where you are on this future nuclear option, whether you have started approaching legislature or how does this play out for Southern in the next couple of years? A - David Ratcliffe: Sure. I will be grad to talk about that a little bit. We've been pretty open about our efforts with regard to the new start consortium, and you know we're part of that. In addition to that, one of the things we did last year internally was to put together an internal team to look very specifically at the process of adding additional capacity at our planned Vogel site since we think that would be first jurisdiction, the Georgia jurisdiction would be the first place where we would actually need base load capacity out in the, somewhere in the 12 to 15 time frame. So and everybody who is talking about adding nuclear plants is looking at adding into existing sites because that seems to be the easiest from a permitting standpoint. So we had a team that spent a lot of time putting a strategic plan in place. You will remember that in the Georgia jurisdiction, there is a very well established process with the Public Service Commission of looking at, through what's called an integrated resource planning process, very formal and public where we file with the commission to look at future needs and get certification of needs and then in a subsequent filing we actually go to the marketplace and solicit bids for that capacity. We would plan in the next couple of years, as we step through both of those processes, to find a way with the Georgia Public Service Commission to engage in a discussion about the merits of nuclear power as a part of that bid process, and exactly how they would like to approach that from a public policy standpoint. So we're, we think we are well positioned. We're also moving forward with discussions with Westinghouse about potential technology commitments, and we think those discussions are moving forward well. Q - Ashar Khan: Okay. Thank you very much.

The next question comes from Amit Sanghrajka with Banc of America Securities. Q - Amit Sanghrajka: Good afternoon, Tom. A - Tom Fanning: How are you? Q - Amit Sanghrajka: Great. Could you just update us on the unaccounted nuclear spent fuel ratio? A - Tom Fanning: I think we're still looking at it. I think we're making progress, but we'll fill a report sometime in August this year. So not much to say until then. Q - Amit Sanghrajka: Okay. Thanks. A - Tom Fanning: Sure.

Your next question comes from Charles Scheritt of UBS. Q - Terran Miller: Hi, it's actually Terran Miller. Just going back to Paul Patterson's question, the $29.5 million potential loss, how is that embedded in your guidance? A - Tom Fanning: It's assumed that we don't have it. Q - Terran Miller: Okay. So if you did have that loss, then we would have to modify the $2.03 to $2.08. A - Tom Fanning: No. You would modify the $2.15 to $2.20. Q - Terran Miller: Well, I thought…… A - Tom Fanning: Okay. So what would you do, I'm sorry. I see what you're saying. You're right, you're right. That's exactly right. The $0.12 assumes syn fuel earning. You take the $0.12 you're $2.03 to $2.08 and the $0.29 would be there. Q - Terran Miller: Okay. A - Tom Fanning: You're exactly right. Q - Terran Miller: Thank you very much. A - Tom Fanning: Yes.

Your next question is a follow-up from Paul Ridzon of Keybanc. Q - Paul Ridzon: Can you, first of all is that 29.5 after tax, and then could we get a follow-up or an update on where the Mirant lawsuit stands? A - Tom Fanning: Yes, sure, it is after tax. And Mirant. There hasn't been a whole lot of developments, although one of the developments has been that the case has been moved out of the Bankruptcy Court in Texas into the U.S. District Court of northern Texas. So it's sitting there, and we'll see what happens from here on out. But otherwise, there hasn't been a whole lot of development. Q - Paul Ridzon: Okay. Thank you. A - Tom Fanning: Thank you.

Your final question comes from Danieale Sykes of Diamond Rose. Q - Danieale Sykes: Thank you. My question has been answered. Thanks. A - David Ratcliffe: Thank you, Danielle.

At this time there are no further questions. David Ratcliffe, Chairman and Chief Executive Officer: Well, thanks again to all of you for joining us. Thank you for the facilitation of the call. Tom Fanning, Chief Financial Officer: Thanks, everyone.

Ladies and gentlemen, this concludes today's conference. You may now disconnect.