It’s having solid answers. A conversation with Allen Franklin.

Why did we decide to spin off Mirant?
Both Mirant and our traditional business were very successful and were continuing to meet or exceed all our financial targets. But we were not seeing the value of Mirant reflected in our stock price. The two parts of the business each offered something different to investors, and there was not a strong investor constituency for both under the same roof. As separate companies, investors have a clear choice between two “pure play” investments. The two businesses are worth more separated than they were together. With Mirant having grown big enough and strong enough to succeed independently, the time was right and it made good sense in the interests of our shareholders to separate. We have created two strong energy companies – Southern Company and Mirant – from one. In the process, we delivered the value of Mirant to our shareholders.

What sets Southern Company apart from the pack now?
We are clearly focusing all of our resources and efforts on the business we know best in the region we know best. With the separation, we now are in a position to grow our Southeastern business to its full potential. We are a full-service provider of electricity. We’re accepting the responsibility to assure a reliable electric supply to our customers. This includes generation, transmission, distribution, and the highest level of customer service. In other words, we’re sticking with what we do best. It’s pretty clear that companies that focus on the things they do best and areas where they understand the market better than anyone else have the best risk-adjusted returns. We are one of the few remaining vertically integrated companies in our industry. That leaves us with all of our options and gives us synergies that benefit shareholders and customers.

What’s so great about the Southeast?
Lots of things. First, this region has strong economic growth, and our business is tied directly to the economic growth of our markets. The faster the region grows, the faster we grow. Also, the Southeast is a business-friendly region where we can work as partners rather than adversaries with policymakers and the people we serve. And, importantly, people in the Southeast understand the necessity of maintaining a reliable energy infrastructure. So we are able to build the facilities that are needed to provide power to our customers.

What kind of growth do you see for the company?
We have set a goal of growing earnings per share 5 percent a year, and we have a solid plan to achieve it. Excluding Mirant, our earnings per share target in 2001 is $1.60. Most of our earnings still come from our regulated business, which we expect to grow about 3 percent a year. We also operate a very successful and growing wholesale business here in the Southeast. We plan to double the earnings from the competitive generation part of this business within five years, and we are well on our way to achieving this goal. This will be a significant growth engine going forward. Combining the traditional regulated business with our much higher-growth competitive generation business, plus the potential we see in new products and services, gets us to an overall 5 percent growth rate.

What challenges do we face in meeting our targets?
The No. 1 priority is to maintain good returns in our regulated business. The key to doing that is continuing to serve our customers with reliable, competitively priced energy and excellent customer service. Customer service is embedded in our culture – it’s part of what we call Southern Style – but we’ve got to do even better than before. Even though we continue to score high in customer satisfaction surveys, we’ve been re-emphasizing the importance of customer service throughout the company.

How are we approaching the competitive generation business?
We are participating in the same competitive generation market as many other well-known independent power producers. But we’re doing it differently than most. Our power is generally sold under long-term contracts that are structured to give us a positive earnings contribution quickly and to minimize the price risk associated with volatile natural gas supplies. We participate in this market in a way that matches the risk and earnings our shareholders expect.

Are mergers or acquisitions part of our strategy?
Mergers and acquisitions are driven in large part by oppor-tunities that arise from time to time. We evaluate all of these opportunities against a set of strict criteria. We are looking for long-term value consistent with the price we would pay, plus a positive contribution to earnings in the near term.

The situation following deregulation in California has put a great deal of attention on the direction our industry is headed. What impact do you see in Southern Company’s region?
I don’t see any immediate impact here in the Southeast. What happened in California does highlight, among other things, the importance of having generating capacity keep pace with economic growth, and of having a diverse mix of fuel sources. In our service area, we’ve never stopped building generating plants and transmission lines. We’ve kept our eyes on the reliability of the system. And we have, I believe, a judicious mix of fuel sources, including coal, nuclear, natural gas, oil, and hydro. The policies of this company and of policy leaders in the Southeast have resulted in very reliable and affordable energy in this region.

Does the environment continue to be a major emphasis for us?
It always has been and always will be. Energy companies have an impact on the environment. It’s just the nature of the business. The question is, how do we manage the business so that we minimize the environmental impact in a way that is affordable to consumers and fair to shareholders. Day to day and year to year, we work to find the right balance. Of course, we strive to operate our facilities in full compliance with all laws and regulations. We also do many things voluntarily, like the $125 million cooling tower project we announced last summer to protect the Chattahoochee River in Georgia. Through our partnerships in a number of significant research programs, we strive even further to find meaningful solutions to environmental issues.

How does the future look for Southern Company?
We’re in a great position. We have the opportunity to put all our talent and resources behind what we do best, in the best market in the country. Our view of the industry over the past few years turned out to be right on target and led to record financial and operating results. Looking ahead, we know where we are going. Our basic strategy for the Southeast matches up very well with what’s in front of us. We have a lot of exciting things going on. I’m very confident.