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Alvin Vogtle had been a fighter pilot during World War II–therefore, a man not easily frightened. He had also successfully escaped from a German POW camp–therefore, a man who understood the importance of taking calculated risks.
As chairman of Southern Company, Vogtle put those attributes to the test. In 1974, the company was awash in short-term debt, and Vogtle needed to buy it down. For that, he would need cash–and his plan for getting it was to issue common stock and use the net proceeds to retire the debt.
It was a daring plan–deliberately diluting the company’s value at a time when the shares themselves were only worth about half of book value. And so, of course, it worked–brilliantly. Vogtle’s bold move preserved the financial integrity of Southern Company and helped keep its operating companies afloat during a time of low revenues and considerable market uncertainty.
Vogtle remembered what his predecessors had taught him–that the financial strength of a business is one of its greatest assets. It was a guiding principle he would soon pass on to others. They–and the generations of employees who followed them–would benefit from the lesson.
In 2001, Southern Company was at a crossroads. Its non-regulated subsidiary, Southern Energy, was being spun off as an independent business, soon to be renamed Mirant. The value of the company was being divided, with 60 percent remaining with the core business and 40 percent departing with the spin-off.
In such cases, conventional wisdom would seem to dictate that the dividend be reduced. But that’s not what happened. Southern Company maintained its commitment to shareholders by keeping its 2001 dividend whole and reassured debt investors that the balance sheet would be further strengthened–reaping the benefits of a customer-focused business strategy.
Once again, the values of the company’s founders had held sway. The importance of financial integrity was reaffirmed, and a strong company became even stronger.
Today, Southern Company has the best financial integrity of any company of size in its industry, and as a result enjoys an industry-leading credit rating, historically low borrowing costs and an outstanding reputation in credit and equity markets worldwide. Which ultimately benefits customers by keeping rates low. Which leads to healthy regulatory relationships and ready access to capital. Which lets us do even more for customers. Which is really what it’s all about.