Southern (SO) risk factors, 2025 10-K

Other

1. 01UTILITY REGULATORY, LEGISLATIVE, AND LITIGATION RISKS
2. 02The Southern Company system's costs of compliance with environmental laws and satisfying related AROs are significant
3. 03however, that all such costs will be recovered. The Registrants expect future compliance expenditures will continue to be significant
4. 04The Southern Company system may be exposed to regulatory and financial risks related to the impact of GHG legislation, regulation, and emission reduction goals
5. 05gas could likewise result in increased costs to the Southern Company system and affect the demand for natural gas as well as the prices charged to customers and the competitive position of natural gas

OPERATIONAL RISKS

1. 06The financial performance of Southern Company and its subsidiaries may be adversely affected if the subsidiaries are unable to successfully operate their facilities or perform certain corporate functions
2. 07Damages, decommissioning, or other costs could exceed the amount of decommissioning trusts or insurance coverage, including statutorily required nuclear incident insurance
3. 08Generation, transmission, and distribution of electricity and transportation and storage of natural gas involve risks that may result in accidents and other operating risks and costs and that may present potential exposures in excess of insurance coverage
4. 09Physical attacks, both threatened and actual, could impact the ability of the Subsidiary Registrants to operate
5. 10An information security incident, including a cybersecurity breach, or the failure of, or inability to remotely access, one or more key technology systems, networks, or processes could impact the ability of the Registrants to operate
6. 11The Southern Company system may not be able to obtain adequate natural gas, fuel supplies, and other resources required to operate the traditional electric operating companies' and Southern Power's electric generating plants or serve Southern Company Gas' natural gas customers
7. 12Increased competition from other companies that supply energy or generation and storage technologies and changes in customer demand for energy could negatively impact Southern Company and its subsidiaries
8. 13Customers and stakeholders are increasingly focused on the Registrants' ability to meet rapidly changing demands for new and varied products, services, and offerings. Additionally, the risk of global climate change continues to shape customers' and stakeholders' sustainability goals and energy needs
9. 14It is also possible that rapid advances in power generation technology could reduce the value of the current electric generating facilities owned by the traditional electric operating companies and Southern Power. Changes in technology could also alter the channels through which electric customers buy or utilize power
10. 15The Subsidiary Registrants are subject to workforce factors that could affect operations
11. 16Supply chain disruptions, inflation, elevated interest rates, tariffs, and other economic factors could negatively impact operations
12. 17interconnect facilities to transmission grids; and increased financing costs as a result of changes in interest rates or as a result of project delays
13. 18Southern Company Gas' significant investment in pipeline development projects involves financial and execution risks

FINANCIAL, ECONOMIC, AND MARKET RISKS

1. 19The electric generation and energy marketing operations of the traditional electric operating companies and Southern Power and the natural gas operations of Southern Company Gas are subject to changes in energy prices and fuel costs
2. 20The Registrants are subject to risks associated with a changing economic environment, customer behaviors, including increased energy conservation, and adoption patterns of technologies by customers
3. 21Customers could also voluntarily reduce their consumption of energy in response to decreases in their disposable income, increases in energy prices, or individual conservation efforts
4. 22Electric power and natural gas supply are generally seasonal businesses. The Subsidiary Registrants have historically sold less power and natural gas when weather conditions are milder
5. 23Acquisitions, dispositions, or other strategic ventures or investments may not result in anticipated benefits and may present risks, including risks not originally contemplated
6. 24Southern Company and Southern Company Gas are holding companies and Southern Power owns many of its assets indirectly through subsidiaries. Each of these companies is dependent on cash flows from their respective subsidiaries to meet their ongoing and future financial obligations
7. 25A downgrade in the credit ratings of any of the Registrants, Southern Company Gas Capital, or Nicor Gas could negatively affect their ability to access capital at reasonable costs and/or could require posting of collateral or replacing certain indebtedness
8. 26Uncertainty in demand for energy can result in lower earnings or higher costs
9. 27The businesses of the Registrants and Nicor Gas are dependent on their ability to successfully access capital through capital markets and financial institutions
10. 28Failure to comply with debt covenants or conditions could adversely affect the ability of the Registrants, SEGCO, Southern Company Gas Capital, or Nicor Gas to execute future borrowings
11. 29Volatility in the securities markets, interest rates, and other factors could substantially increase defined benefit pension and other postretirement plan costs and affect the funding available for nuclear decommissioning
12. 30Shareholder activism could cause Southern Company to incur significant expense, hinder execution of Southern Company's business strategy, and impact Southern Company's stock price
13. 31The Registrants are subject to risks associated with their ability to obtain adequate insurance at acceptable costs
14. 32The use of derivative contracts by Southern Company and its subsidiaries in the normal course of business could result in financial losses that negatively impact the net income of the Registrants or in reported net income volatility
15. 33Future impairments of goodwill or long-lived assets could have a material adverse effect on the Registrants' results of operations