Southern Co raises spending plan by 7% as data center power demand swells

By Vallari Srivastava and Laila Kearney

Feb 19 (Reuters) - Southern Co SO.N raised its five-year spending plan by roughly 7% on Thursday as the major electric and gas utility in the U.S. South sells more electricity to data centers and industrial manufacturers.

U.S. utilities have invested heavily to upgrade electric grids as they face extreme weather and growing demand from power-hungry data centers dedicated to AI and cryptocurrency, alongside a shift by homes and businesses toward electric heating and transport.

"We're in the midst of a watershed moment for the energy industry and our nation," Southern Co CEO Chris Womack said on a call with investors.

Southern Co expects to spend about $81 billion from 2026 through 2030, compared with its prior five-year plan of $76 billion, with about half of that spending going to boosting power generation.

The Atlanta, Georgia-based utility said it had contracted 10 gigawatts of large-load customers across Alabama, Georgia and Mississippi, including Google GOOGL.O, Meta META.O, Microsoft MSFT.O and Compass Datacenters.

Its shares rose more than 4% in afternoon trade.

Data centers with a combined demand of around 75 gigawatts have expressed interest in connecting to Southern Co's system, executives said on an earnings call with investors. One gigawatt is enough to power about 750,000 homes.

Among its plans to expand its power supplies, Southern Co said it could redirect to new customers about 1,000 megawatts of natural gas-fired generation capacity by 2030. It is also in late-stage discussions to increase the output of its existing natural gas fleet to create an additional 700 megawatts.

"Southern continues to capitalize on its growth opportunities in a prudent manner," Evercore ISI analyst Nicholas Amicucci said.

The utility's capital spending and earnings outlook should drive shares higher, while still maintaining upside potential as its service territory in the Southeast U.S. "continues to see strong demand from large loads seeking grid connection given the region's favorable regulatory environment and affordability," he said.

Southern Co is the second-largest U.S. utility, with 9 million customers across Alabama, Georgia, Illinois, Mississippi, Tennessee and Virginia.

In addition to data center demand, extreme weather and growing populations in the U.S. South are driving up power use.

A winter storm in January caused the second-highest winter peak electric load on Southern Co's system, it said.

Also on Thursday, Southern Co forecast adjusted annual profit below analysts' estimates.

For the quarter ended December 31, Southern Co posted an adjusted profit of 55 cents per share, below analysts' expectations of 57 cents, according to data compiled by LSEG.

Its operating expenses jumped 14.7% during the quarter, while revenue rose 10%.

The company expects adjusted profit for 2026 to be between $4.50 and $4.60 per share, with the midpoint slightly below the estimate of $4.56 per share.