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How are we doing in working toward being the best investment in the electric utility industry?
We're making great progress. In 1997, we passed milestone after milestone along the pathway that is our long-term strategic plan. Our traditional business is solid and stable. Our international and energy marketing businesses are developing according to plan. And while 1997 was not a spectacular year, it was a solid year. Our stock price reached a new all-time high. And total return to shareholders was 21 percent. Our journey is not a quarter-to-quarter journey. It is a journey down a pathway. It's a pathway that leads us to being the best investment in the electric utility industry.
Our traditional business is the main vehicle we're driving down that pathway.
No question about it. Our traditional business is the absolute foundation of everything else we do. Its success enables us to work for additional growth elsewhere. Even as our investments begin generating the income we expect, our traditional business should still produce about 70 percent of our income stream. Our traditional business-and our employees who make it successful-are absolutely critical to everything else we do.
What kind of growth do you see in our traditional business?
Throughout the Southeast-from the Gulf Coast to Alabama to Georgia-it's a pretty solid picture. It's a great area. It's a growing area. You see the excitement of companies relocating to the Southeast. We've been involved in economic development for a long time. And that has paid big dividends for the states we serve and for us. Compared with other electric utilities, our traditional business growth is great. But compared with other types of companies, that growth is small. It's our international business and other investments that will help drive our growth.
How is our international business doing?
We're right on target. Our strategy is to develop a balanced portfolio of investments. We're doing that. We have some-like SWEB and Bewag-that provide immediate value to our earnings stream. We also have some-like CEPA-that should create good growth over the long term. The next key milestone for us is the completion of Sual, a major generating plant in the Philippines. We expect Sual to be a major contributor to our growth in Asia.
Will the recent economic turmoil in Asia affect our investments there?
I don't think so. Especially when you look at per capita electricity consumption. In the Philippines, it's less than 350 kilowatt-hours per year. That compares with 11,000 kilowatt-hours per year in the United States. In Pakistan, it's about 400 kilowatt-hours per year. In mainland China, it's less than 700 kilowatt-hours per year. There is a significant need for electric capacity. There are tremendous opportunities for growth.
What about our energy marketing business?
We've made great progress. With Southern Company Energy Marketing-our joint venture with Vastar-we can offer electricity and natural gas and meet all our customers' energy needs. Energy is a commodity. Like most commodities, it is a low-margin business. So you have to have a huge volume of sales and an array of value-added products to be successful in energy marketing. That's our aim.
How do you view competition in the electric utility industry?
Competition provides risk and opportunity. We've been positioning ourselves well for it. Our rates are relatively low. Our customer satisfaction numbers are among the highest in our industry. We're active in the communities we serve. We're a good, solid citizen who cares about customers and the environment. We've built good relationships with our customers. We're well-structured to provide the lowest-cost energy. So I think our losses to competition may not be as significant as those of other utilities. Add to this the very strong unit (Southern Company Energy Marketing) we've built to participate in opportunities outside our traditional business. So, rather than a potential loss, competition can be a great opportunity for us.
Has Southern Company's advertising been effective?
Our advertising is paying dividends in terms of market entry. The true measure of advertising-and of building a brand-is customer recognition. That's important as we market energy outside our traditional business. When we call on potential customers, we're finding that they know who we are. That's because they've seen our ads.
Where do you see the biggest opportunities for Southern Company?
I think the biggest opportunities are balanced among a healthy traditional business, our international business, and energy marketing. In our international business, we try to find the right opportunities quickly and get there ahead of the market. We've gained some expertise in doing that. In energy marketing, we try to be early to markets, and big enough in the markets to make an impact.
How will you spend most of your time in 1998?
I will spend a lot of time making sure that we're leading the changes in our industry. And that we're taking advantage of opportunities the changes bring. I will spend a great deal of my time on our international business. I will also spend a great deal of my time on people planning. I want to make sure we have the right people for the right opportunities.
Why is the future better than ever?
It used to be that an electric utility's growth was defined by that of its traditional service territory. Today, competitive market initiatives allow an electric utility to define its own growth. That's exciting. We have a strong traditional business. And as markets open, there are more opportunities than ever before. We're positioned to succeed. That's what makes our future better than ever.
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