Caught in Alabama Conflict: Reit. Buy on Deep Value as Gas Utes Out of Favor.

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Caught in Alabama Conflict: Reit. Buy on Deep Value as Gas Utes Out of Favor.

s 9.84%, near PREV

its 9.90% ceiling, while SR Gulf is 9.45%, below its 9.70% floor. We estimate a 25-50 bps Alabama ROE

cut is $2.3-$4.5mn of net income loss, or 70-140 bps FY27 EPS. RSE term and non-ROE mechanics more

relevant than ROE cut itself, particularly customer charge design, CCM treatment and whether the next Exhibit 1 - SR's FY3 P/E Premium/Discount vs.

reset lands under the new seven-member commission. Electric Peers

10.0%

5.0%NT estimates lower on weather impacts, 6.4% FY27-30 CAGR above guide mdpt. Model refresh

with TN consolidated, transaction cash flows embedded and EPS matched to mgmt methodology. 0.0%

Revisions driven by Missouri weather/usage recovery timing and improved FTY / TN visibility. -5.0%

-10.0%

MO remains credibility repair lever; upside from cash recovery and FTY rate design. 2Q miss -15.0% -15.7%

revealed SR MO not fully protected against weather/usage-per-HDD volatility, creating a ~$28mn -20.0%

pre-tax shortfall; we assume 50% recovery in FY27. We believe larger upside pot. is a rate-design . -25.0%Mar-21 Sep-21 Mar-22 Sep-22 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Sep-25 Mar-26

reset that updates billing determinants, improves cash recovery and reduces lag. FY28 the key proof Source: Jefferies LLC, FactSet SR's transition is a longer dated story

year whether FTY cash recovery can improve FFO/Debt closer to 14.5% target and above 12%/13% d/ particularly into FY28 with TN integration

g agency threshold. and MO's future test year, and recent

TN an upside lever if capital follows regulation. ARM recovery, Nashville customer growth and pullback presents a compelling entry point.

potential capex revisions give TN a cleaner conversion path than Missouri or Alabama.