<PAGE>

<TABLE>
===================================================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           _________________________
                                    FORM 10-Q
              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the Quarter Ended June 30, 1999
                                       OR
             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Transition Period from _____to_____


      Commission                    Registrant, State of Incorporation,                   I.R.S. Employer
      File Number                   Address and Telephone Number                          Identification No.

         <S>                        <C>                                                       <C>
         1-3526                     The Southern Company                                      58-0690070
                                    (A Delaware Corporation)
                                    270 Peachtree Street, N.W.
                                    Atlanta, Georgia 30303
                                    (404) 506-5000

         1-3164                     Alabama Power Company                                     63-0004250
                                    (An Alabama Corporation)
                                    600 North 18th Street
                                    Birmingham, Alabama 35291
                                    (205) 257-1000

         1-6468                     Georgia Power Company                                     58-0257110
                                    (A Georgia Corporation)
                                    241 Ralph McGill Boulevard, N.E.
                                    Atlanta, Georgia 30308
                                    (404) 506-6526

         0-2429                     Gulf Power Company                                        59-0276810
                                    (A Maine Corporation)
                                    One Energy Place
                                    Pensacola, Florida 32520-0102
                                    (850) 444-6111

         0-6849                     Mississippi Power Company                                 64-0205820
                                    (A Mississippi Corporation)
                                    2992 West Beach
                                    Gulfport, Mississippi 39501
                                    (228) 864-1211

         1-5072                     Savannah Electric and Power Company                       58-0418070
                                    (A Georgia Corporation)
                                    600 East Bay Street
                                    Savannah, Georgia 31401
                                    (912) 644-7171

===================================================================================================================
</TABLE>


<PAGE>

    Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No____


<TABLE>
<CAPTION>
                                                         Description of                          Shares Outstanding
Registrant                                               Common Stock                            at July 31, 1999

<S>                                                      <C>                                            <C>
The Southern Company                                     Par Value $5 Per Share                         683,159,074
Alabama Power Company                                    Par Value $40 Per Share                          5,608,955
Georgia Power Company                                    No Par Value                                     7,761,500
Gulf Power Company                                       No Par Value                                       992,717
Mississippi Power Company                                Without Par Value                                1,121,000
Savannah Electric and Power Company                      Par Value $5 Per Share                          10,844,635


</TABLE>

     This combined Form 10-Q is separately filed by The Southern Company,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company and Savannah Electric and Power Company. Information contained
herein relating to any individual company is filed by such company on its own
behalf. Each company makes no representation as to information relating to the
other companies.



<PAGE>
<TABLE>
<CAPTION>


                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                                 June 30, 1999
                                                                                                                              Page
                                                                                                                             Number
<S>                                                                                                                           <C>
DEFINITIONS........................................................................................................            4
                                          PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)
Item 2.  Management's Discussion and Analysis of Results of Operations and Financial Condition
             The Southern Company and Subsidiary Companies
                Condensed Consolidated Statements of Income........................................................            6
                Condensed Consolidated Statements of Cash Flows....................................................            7
                Condensed Consolidated Balance Sheets..............................................................            8
                Condensed Consolidated Statements of Comprehensive Income and
                   Accumulated Other Comprehensive Income..........................................................           10
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           11
             Alabama Power Company
                Condensed Statements of Income.....................................................................           21
                Condensed Statements of Cash Flows.................................................................           22
                Condensed Balance Sheets...........................................................................           23
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           25
                Exhibit 1 - Report of Independent Public Accountants...............................................           29
             Georgia Power Company
                Condensed Statements of Income.....................................................................           31
                Condensed Statements of Cash Flows.................................................................           32
                Condensed Balance Sheets...........................................................................           33
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           35
                Exhibit 1 - Report of Independent Public Accountants...............................................           40
             Gulf Power Company
                Condensed Statements of Income.....................................................................           42
                Condensed Statements of Cash Flows.................................................................           43
                Condensed Balance Sheets...........................................................................           44
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           46
             Mississippi Power Company
                Condensed Statements of Income.....................................................................           51
                Condensed Statements of Cash Flows.................................................................           52
                Condensed Balance Sheets...........................................................................           53
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           55
             Savannah Electric and Power Company
                Condensed Statements of Income.....................................................................           60
                Condensed Statements of Cash Flows.................................................................           61
                Condensed Balance Sheets...........................................................................           62
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           64
             Notes to the Condensed Financial Statements...........................................................           67
Item 3.      Quantitative and Qualitative Disclosures about Market Risk............................................           68
                                            PART II - OTHER INFORMATION
Item 1.  Legal Proceedings.........................................................................................           73
Item 2.  Changes in Securities..................................................................................... Inapplicable
Item 3.  Defaults Upon Senior Securities........................................................................... Inapplicable
Item 4.  Submission of Matters to a Vote of Security Holders.......................................................           73
Item 5.  Other Information......................................................................................... Inapplicable
Item 6.  Exhibits and Reports on Form 8-K..........................................................................           75
         Signatures ...............................................................................................           76

</TABLE>
                                       3
<PAGE>
<TABLE>
<CAPTION>


                                   DEFINITIONS
TERM                                             MEANING
<S>                                              <C>
affiliates..................................     ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
ALABAMA.....................................     Alabama Power Company
BEWAG.......................................     Berliner Kraft und Licht AG
CEPA........................................     Consolidated Electric Power Asia Limited
Clean Air Act...............................     Clean Air Act Amendments of 1990
ECO Plan....................................     Environmental Compliance Overview Plan
Energy Act..................................     Energy Policy Act of 1992
EWG.........................................     Exempt wholesale generator
FASB........................................     Financial Accounting Standards Board
FERC........................................     Federal Energy Regulatory Commission
Form 10-K...................................     Combined Annual Report on Form 10-K of SOUTHERN, ALABAMA,
                                                 GEORGIA, GULF, MISSISSIPPI and SAVANNAH for the year ended
                                                 December 31, 1998
FUCO........................................     Foreign utility company
GEORGIA.....................................     Georgia Power Company
GULF........................................     Gulf Power Company
MISSISSIPPI.................................     Mississippi Power Company
Mobile Energy...............................     Mobile Energy Services Company, L.L.C. and Mobile Energy
                                                 Services Holdings, Inc.
OPC.........................................     Oglethorpe Power Corporation
operating affiliates........................     see affiliates
operating companies.........................     see affiliates
PEP.........................................     Performance Evaluation Plan
PSC.........................................     Public Service Commission
SAVANNAH....................................     Savannah Electric and Power Company
SEC.........................................     Securities and Exchange Commission
SOUTHERN....................................     The Southern Company
Southern Energy.............................     Southern Energy, Inc.
                                                 including SOUTHERN subsidiaries managed or controlled by Southern
                                                 Energy
SOUTHERN system.............................     SOUTHERN, affiliates, Southern Energy, and other subsidiaries
SWEB........................................     South Western Electricity plc (United Kingdom)
TVA.........................................     Tennessee Valley Authority
</TABLE>

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     This Quarterly Report on Form 10-Q includes forward-looking statements
in addition to historical information. The registrants caution that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking statements; accordingly, there can
be no assurance that such indicated results will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the electric utility industry; the extent and timing of the
entry of additional competition in the markets of SOUTHERN's subsidiaries;
challenges related to Year 2000 readiness; potential business strategies,
including acquisitions or dispositions of assets or internal restructuring, that
may be pursued by the registrants; state and federal rate regulation in the
United States; changes in or application of environmental and other laws and
regulations to which SOUTHERN and its subsidiaries are subject; political, legal
and economic conditions and developments in the United States and in foreign
countries in which the subsidiaries operate; financial market conditions and the
results of financing efforts; changes in commodity prices and interest rates;
weather and other natural phenomena; the performance of projects undertaken by
the non-traditional business and the success of efforts to invest in and develop
new opportunities; and other factors discussed elsewhere herein and in other
reports (including Form 10-K) filed from time to time by the registrants with
the SEC.

                                       4

<PAGE>




                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES



                                       5


<PAGE>

<TABLE>
<CAPTION>
                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                    For the Three Months              For the Six Months
                                                                       Ended June 30,                   Ended June 30,
                                                               -------------------------------   ------------------------------
                                                                   1999             1998             1999            1998
                                                               --------------  ---------------   --------------  --------------

<S>                                                               <C>              <C>              <C>             <C>
OPERATING REVENUES                                                $2,791,080       $2,913,381       $5,232,645      $5,408,258
                                                               --------------  ---------------   --------------  --------------
OPERATING EXPENSES:
Operation--
  Fuel                                                               656,890          616,504        1,169,356       1,090,832
  Purchased power                                                    244,152          302,978          518,578         610,977
  Other                                                              518,564          533,114        1,005,633         993,683
Maintenance                                                          233,945          234,681          455,231         434,669
Depreciation and amortization                                        325,163          434,201          640,244         766,286
Taxes other than income taxes                                        145,060          143,159          291,322         290,491
Income taxes                                                         159,895          158,070          268,503         293,992
                                                               --------------  ---------------   --------------  --------------
Total operating expenses                                           2,283,669        2,422,707        4,348,867       4,480,930
                                                               --------------  ---------------   --------------  --------------
OPERATING INCOME                                                     507,411          490,674          883,778         927,328
OTHER INCOME:
Equity in earnings of unconsolidated subsidiaries                     48,242           10,640          142,923          45,136
Interest income                                                       40,142          113,508           69,628         151,413
Other, net                                                            10,954          (11,409)          37,666           1,782
Income taxes applicable to other income                                7,306           (6,102)          (8,854)            922
                                                               --------------  ---------------   --------------  --------------
INCOME BEFORE INTEREST CHARGES                                       614,055          597,311        1,125,141       1,126,581
                                                               --------------  ---------------   --------------  --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                           164,355          178,472          330,708         352,749
Interest on notes payable                                             44,058           32,534           71,515          61,436
Amortization of debt discount, premium and expense, net                9,991           33,515           19,011          40,472
Other interest charges                                                16,056           26,900           29,253          46,008
Minority interests in subsidiaries                                    14,841           13,123           36,184          29,710
Distributions on capital and preferred
  securities of subsidiary companies                                  46,181           35,569           89,948          70,666
Preferred dividends of subsidiary companies                            4,588            6,425           10,221          13,065
                                                               --------------  ---------------   --------------  --------------
Interest charges and other, net                                      300,070          326,538          586,840         614,106
                                                               --------------  ---------------   --------------  --------------

CONSOLIDATED NET INCOME                                            $ 313,985        $ 270,773        $ 538,301       $ 512,475
                                                               ==============  ===============   ==============  ==============


AVERAGE NUMBER OF SHARES OF
   COMMON STOCK OUTSTANDING (Thousands)                              693,465          697,659          695,996         696,355

BASIC AND DILUTED EARNINGS
PER SHARE OF COMMON STOCK                                              $0.45            $0.39            $0.77           $0.74

CASH DIVIDENDS PAID PER SHARE                                         $0.335           $0.335            $0.67           $0.67
   OF COMMON STOCK




               The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>

                                                                 6
<PAGE>
<TABLE>
<CAPTION>

                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)
                                                                                                      For the Six Months
                                                                                                        Ended June 30,
                                                                                              -----------------------------------
                                                                                                   1999                1998
                                                                                              ---------------     ---------------

OPERATING ACTIVITIES:
<S>                                                                                                 <C>                 <C>
Consolidated net income                                                                             $538,301            $512,475
Adjustments to reconcile net income to net cash provided by
     operating activities--
          Depreciation and amortization                                                              701,860             880,545
          Deferred income taxes and investment tax credits                                            79,902             (25,900)
          Gain on asset sales                                                                         (9,278)            (32,168)
          Equity in earnings of unconsolidated subsidiaries                                         (142,910)            (43,571)
          Other, net                                                                                  62,301              64,349
          Changes in certain current assets and liabilities
            excluding effects from acquisitions --
               Receivables, net                                                                      (67,533)           (147,655)
               Special deposits-other                                                                  2,746               2,897
               Fossil fuel stock                                                                     (94,238)            (57,242)
               Materials and supplies                                                                 (4,456)              6,481
               Prepayments                                                                           (21,383)            (49,494)
               Accounts payable                                                                     (287,931)           (214,387)
               Taxes accrued                                                                          74,338             165,187
               Other                                                                                  (3,749)             35,139
                                                                                              ---------------     ---------------
Net cash provided from operating activities                                                          827,970           1,096,656
                                                                                              ---------------     ---------------
INVESTING ACTIVITIES:
Gross property additions                                                                          (1,060,446)           (957,924)
Southern Energy business acquisitions, net of cash acquired                                       (1,476,990)           (199,526)
Sales of property                                                                                      9,586             186,577
Other                                                                                                (95,875)            (21,407)
                                                                                              ---------------     ---------------
Net cash used for investing activities                                                            (2,623,725)           (992,280)
                                                                                              ---------------     ---------------
FINANCING ACTIVITIES:
Proceeds--
  Common stock                                                                                        23,748             111,872
  Capital and preferred securities                                                                   250,000             245,000
  Pollution control obligations                                                                      339,650             210,300
  Other long-term debt                                                                               585,265           1,073,532
  Notes receivable                                                                                   195,000             182,792
Retirements/repurchases--
  Common stock repurchased                                                                          (250,921)                  -
  Preferred stock                                                                                    (85,732)            (40,771)
  First mortgage bonds                                                                              (524,800)           (502,795)
  Pollution control obligations                                                                      (51,000)           (102,990)
  Other long-term debt                                                                              (347,281)           (173,989)
  Notes receivable                                                                                   (64,634)            (79,000)
Special deposits-redemption funds                                                                   (288,564)            (90,707)
Notes payable, net                                                                                 2,117,626            (323,463)
Payment of common stock dividends                                                                   (467,324)           (466,072)
Miscellaneous                                                                                        (57,861)            (61,808)
                                                                                              ---------------     ---------------
Net cash provided from (used for) financing activities                                             1,373,172             (18,099)
                                                                                              ---------------     ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                             (422,583)             86,277
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                     871,353             600,820
                                                                                              ===============     ===============
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                          $448,770            $687,097
                                                                                              ===============     ===============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
  Interest (net of amount capitalized)                                                              $489,072            $503,311
  Income taxes                                                                                      $139,130            $238,014
Southern Energy business acquisitions--
  Fair value of assets acquired                                                                   $1,509,815            $199,526
  Less cash paid for common stock                                                                  1,476,990             199,526
                                                                                              ===============     ===============
    Liabilities assumed                                                                              $32,825                   -
                                                                                              ===============     ===============



             The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>

                                                               7


<PAGE>

<TABLE>
<CAPTION>
                                       THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                             (Stated in Thousands of Dollars)

                                                          ASSETS

                                                                                         At June 30,
                                                                                            1999              At December 31,
                                                                                         (Unaudited)             1998
                                                                                       ----------------     ----------------
UTILITY PLANT:
<S>                                                                                        <C>                  <C>
Plant in service                                                                           $36,201,673          $35,185,013
Less accumulated provision for depreciation                                                 13,703,547           13,239,140
                                                                                       ----------------     ----------------
                                                                                            22,498,126           21,945,873
Nuclear fuel, at amortized cost                                                                207,407              216,744
Construction work in progress                                                                2,187,583            1,782,482
                                                                                       ----------------     ----------------
Total                                                                                       24,893,116           23,945,099
                                                                                       ----------------     ----------------

OTHER PROPERTY AND INVESTMENTS:
Equity investments in unconsolidated subsidiaries                                            1,518,768            1,548,951
Property rights, net of accumulated amortization
 of $188,552 at June 30, 1999 and $169,339 at December 31, 1998                              1,199,509            1,184,734
Goodwill, net of accumulated amortization
 of $130,156 at June 30, 1999 and $105,755 at December 31, 1998                              1,943,362            1,949,213
Other Intangibles, net of accumulated amortization
 of $8,122 at June 30, 1999 and $791 at December 31, 1998                                      601,881              308,009
Nuclear decommissioning trusts                                                                 598,148              516,719
Miscellaneous                                                                                  729,222              643,280
                                                                                       ----------------     ----------------
Total                                                                                        6,590,890            6,150,906
                                                                                       ----------------     ----------------

CURRENT ASSETS:
Cash and cash equivalents                                                                      448,770              871,353
Special deposits                                                                               326,104               86,592
Receivables, less accumulated provisions for uncollectible accounts
 of $93,306 at June 30, 1999 and $112,511 at December 31, 1998                               1,731,996            1,797,913
Fossil fuel stock, at average cost                                                             379,071              251,974
Materials and supplies, at average cost                                                        539,442              515,715
Prepayments                                                                                    126,348              101,843
Vacation pay deferred                                                                           79,829               80,752
                                                                                       ----------------     ----------------
Total                                                                                        3,631,560            3,706,142
                                                                                       ----------------     ----------------


DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges related to income taxes                                                     1,016,448            1,035,724
Prepaid pension costs                                                                          539,808              489,572
Debt expense, being amortized                                                                  134,348              129,257
Premium on reacquired debt, being amortized                                                    301,290              294,055
Miscellaneous                                                                                  462,304              440,754
                                                                                       ----------------     ----------------
Total                                                                                        2,454,198            2,389,362
                                                                                       ----------------     ----------------

TOTAL ASSETS                                                                               $37,569,764          $36,191,509
                                                                                       ================     ================






           The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>

                                                             8

<PAGE>

<TABLE>
<CAPTION>
                                       THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                             (Stated in Thousands of Dollars)

                                              CAPITALIZATION AND LIABILITIES

                                                                                         At June 30,
                                                                                            1999              At December 31,
                                                                                         (Unaudited)             1998
                                                                                       ----------------     ----------------
CAPITALIZATION:
<S>                                                                                        <C>                   <C>
Common stock, par value $5 per share --
  Authorized -- 1 billion shares
  Issued -- June 30, 1999: 700,617,076 shares;
         -- December 31, 1998:  699,772,723 shares                                          $3,503,085           $3,498,864
Paid-in capital                                                                              2,480,150            2,462,116
Treasury, at cost -- June 30, 1999:  11,105,556 shares;
                  -- December 31, 1998:  2,025,536 shares                                     (307,595)             (57,863)
Retained earnings                                                                            3,949,201            3,878,332
Accumulated other comprehensive income                                                        (100,294)              15,400
                                                                                       ----------------     ----------------
                                                                                             9,524,547            9,796,849
Preferred stock of subsidiaries                                                                369,008              369,084
Company or subsidiary obligated mandatorily redeemable
  capital and preferred securities                                                           2,425,120            2,179,440
Long-term debt                                                                              10,264,011           10,471,692
                                                                                       ----------------     ----------------
Total                                                                                       22,582,686           22,817,065
                                                                                       ----------------     ----------------

CURRENT LIABILITIES:
Amount of securities due within one year                                                     1,144,605            1,525,596
Notes payable                                                                                4,001,233            1,827,808
Accounts payable                                                                               698,153            1,026,869
Customer deposits                                                                              129,558              125,078
Taxes accrued--
  Income taxes                                                                                 147,458               49,923
  Other                                                                                        256,074              299,051
Interest accrued                                                                               232,400              233,355
Vacation pay accrued                                                                           112,751              111,611
Miscellaneous                                                                                  481,387              542,836
                                                                                       ----------------     ----------------
Total                                                                                        7,203,619            5,742,127
                                                                                       ----------------     ----------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                            4,429,055            4,480,970
Deferred credits related to income taxes                                                       690,286              714,665
Accumulated deferred investment tax credits                                                    708,403              723,393
Employee benefits provisions                                                                   516,081              473,734
Minority interests in subsidiaries                                                             580,783              535,145
Prepaid capacity revenues                                                                       88,400               96,080
Department of Energy assessments                                                                64,191               64,191
Disallowed Plant Vogtle capacity buyback costs                                                  53,705               54,458
Storm damage reserves                                                                           25,586               23,980
Miscellaneous                                                                                  626,969              465,701
                                                                                       ----------------     ----------------
Total                                                                                        7,783,459            7,632,317
                                                                                       ----------------     ----------------

TOTAL CAPITALIZATION AND LIABILITIES                                                       $37,569,764          $36,191,509
                                                                                       ================     ================



           The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>

                                         9
<PAGE>
<TABLE>
<CAPTION>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
      CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                               For the Three Months              For the Six Months
                                                                  Ended June 30,                   Ended June 30,
                                                           ------------------------------   ------------------------------
                                                               1999            1998             1999            1998
                                                           --------------  --------------   --------------  --------------

<S>                                                             <C>             <C>              <C>             <C>
Consolidated net income                                         $313,985        $270,773         $538,301        $512,475
Other comprehensive income:
  Foreign currency translation adjustments                       (13,853)           (124)        (177,991)          2,998
  Less applicable income taxes                                    (4,848)            (43)         (62,297)          1,049
                                                           --------------  --------------   --------------  --------------
CONSOLIDATED COMPREHENSIVE INCOME                               $304,980        $270,692         $422,607        $514,424
                                                           ==============  ==============   ==============  ==============

</TABLE>
<TABLE>
<CAPTION>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
        CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
                        (Stated in Thousands of Dollars)


                                                                      At June 30,                     At December 31,
                                                                         1999                             1998
                                                                     ----------------                 --------------
                                                                      (Unaudited)
<S>                                                                       <C>                               <C>
Balance at beginning of period                                            $ 15,400                          $ 7,176
Change in current period                                                  (115,694)                           8,224
                                                                     --------------                   --------------
BALANCE AT END OF PERIOD                                                 $(100,294)                         $15,400
                                                                     ==============                   ==============

</TABLE>


                                                                10





<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                  SECOND QUARTER 1999 vs. SECOND QUARTER 1998
                                       AND
                     YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998

RESULTS OF OPERATIONS

SOUTHERN's traditional business is primarily represented
by its five domestic electric utility operating companies, which provide
electric service in four Southeastern states. Another significant portion of
SOUTHERN's business is its non-traditional business primarily represented by
Southern Energy, which owns and manages international and domestic businesses
for SOUTHERN. Businesses acquired by Southern Energy have been included in the
consolidated statements of income since the date of acquisition. Certain changes
in operating revenues and expenses from the prior period result from such
acquisitions.

Earnings

SOUTHERN's consolidated net income for the second quarter
and year-to-date 1999 was $314 million ($0.45 per share) and $538 million ($0.77
per share), respectively, compared to $270 million ($0.39 per share) and $512
million ($0.74 per share) for the corresponding periods of 1998. Earnings for
the traditional business were relatively flat in the second quarter.
Year-to-date earnings for the traditional business were down due primarily to
mild weather. Earnings for the non-traditional business rose primarily due to
profits from significant new investments in power-generation businesses in New
England and California, improved performance and continued growth of Southern
Company Energy Marketing's trading business and increased profitability from
Southern Energy's Asian business units.
<TABLE>
<CAPTION>

     Significant income statement items appropriate for discussion include the following:

                                                                           Increase (Decrease)
                                                      ---------------------------------------------------------------
                                                              Second Quarter                   Year-To-Date
                                                      ------------------------------- -------------------------------
                                                        (in thousands)        %       (in thousands)          %
<S>                                                      <C>                 <C>         <C>                 <C>
Operating revenues...............................        $(122,301)          (4.2)       $(175,613)          (3.2)
Fuel expense.....................................           40,386            6.6           78,524            7.2
Purchased power expense..........................          (58,826)         (19.4)         (92,399)         (15.1)
Depreciation and amortization expense............         (109,038)         (25.1)        (126,042)         (16.4)
Equity in earnings of unconsolidated
   subsidiaries..................................           37,602          353.4           97,787          216.6
Interest income..................................          (73,366)         (64.6)         (81,785)         (54.0)
Other, net.......................................           22,363          196.0           35,884            N/M
Interest on notes payable........................           11,524           35.4           10,079           16.4
Amortization of debt discount, premium and
   expense, net..................................          (23,524)         (70.2)         (21,461)         (53.0)
Other interest charges...........................          (10,844)         (40.3)         (16,755)         (36.4)

</TABLE>

N/M - Not meaningful

                                       11
<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Operating revenues. Operating revenues for the traditional business for the
second quarter and year-to-date 1999 decreased $188 million or 7.7% and $260
million or 5.9%, respectively, when compared to the corresponding periods of
1998. Traditional business revenues decreased for this second quarter and
year-to-date 1999 due primarily to mild weather which affected retail energy
sales and a retail rate reduction ordered by the Georgia PSC which affected
GEORGIA's revenues. Retail revenues, excluding fuel and any demand-side program
revenues which generally do not affect income, decreased $147 million for the
second quarter and $192 million year-to-date 1999. Operating revenues for
Southern Energy increased approximately $59 million or 13.3% and $72 million or
7.6%, respectively, during the second quarter and year-to-date 1999 when
compared to the corresponding periods in 1998. The increases in Southern
Energy's operating revenues are primarily attributed to its recent investments
in power-generation businesses in New England and California, which were
partially offset by a decrease in revenues at SWEB and the deconsolidation of
Mobile Energy. Effective with the bankruptcy filing in January 1999, Mobile
Energy is accounted for under the equity method, rather than being consolidated
as before. See Note (O) in the "Notes to the Condensed Financial Statements"
herein for further information regarding Mobile Energy. Reference is also made
to Item 1 - BUSINESS - "Non-Traditional Business" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form
10-K.

     Fuel expense. The increases in this expense for the current quarter and
year-to-date 1999 are attributed to the acquisitions of power-generating
businesses in New England and California.

     Purchased power expense. Purchased power expense for the traditional
business fell approximately $19 million or 18.1% and $45 million or 25.6%,
respectively, for the second quarter and year-to-date 1999. The decrease in
these expenses for the traditional business is mainly attributed to a decrease
in energy purchases related to power marketing activities during this second
quarter and year-to-date 1999 when compared to the same periods in 1998. For the
non-traditional business, these expenses decreased $40 million or 20.1% for the
quarter and $47 million or 10.8% year-to-date due mainly to a decrease in
purchased power at SWEB.

     Depreciation and amortization expense. These decreases for the second
quarter and year-to-date 1999 when compared to the corresponding periods in 1998
are primarily attributed to higher depreciation charges recognized in 1998 under
the prior accounting order and the completion in 1998 of the amortization of
deferred Plant Vogtle costs. Under GEORGIA's new order, fixed rate reductions
and accelerated amortization are being recognized ratably throughout 1999.
During 1998, variable accelerated depreciation recorded under the previous
accounting order was primarily recognized during the higher revenue months.

     Equity in earnings of unconsolidated subsidiaries. The second quarter
increase resulted from the continued improved profitability of Shajiao C
operations in China and Southern Company Energy Marketing. The year-to-date
increase in this item also reflects the $54 million settlement of Southern
Energy's claims against a contractor relating to the Shajiao C construction
project and the improvement in profitability of the Shajiao C operations. The
amount of the settlement of contractor claims was partially offset by other
related expenses and income taxes included in other income accounts.

     Interest income. Second quarter and year-to-date decreases are directly
related to the 1998 settlement of tax issues between SOUTHERN and the Internal
Revenue Service.

     Other, net. The changes in this item for the second quarter and
year-to-date are mainly due to reduced donations and contributions in these
periods when compared to the same periods in 1998.

                                       12
<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     Interest on notes payable. The second quarter and year-to-date 1999
increases are attributed to the non-traditional business. These amounts
increased due to higher outstanding debt associated with Southern Energy's
acquisitions in late-1998 and the first half of 1999.

     Amortization of debt discount, premium and expense, net. These decreases
are related to accelerated amortization in 1998 of premiums incurred to
refinance high-cost debt.

     Other interest charges. These charges decreased in the second quarter and
year-to-date 1999 when compared to the same periods in 1998 due to the
recognition in 1998 of increased interest related to tax issues.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment, with non-traditional business becoming more
significant. For additional information relating to non-traditional business
activities, see Item 1 - BUSINESS - "Non-Traditional Business" in the Form 10-K.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, SOUTHERN is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form
10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of SOUTHERN in the Form 10-K.

     The U.S. Environmental Protection Agency is conducting an industry-wide
investigation concerning the compliance status of certain coal-fired generating
facilities, including certain units of the SOUTHERN system, under the new source
review provisions of the Clean Air Act. Although the outcome of this matter
cannot now be determined, if adverse it could result in substantial penalties
and additional capital costs.

     In April 1999, SOUTHERN, through its subsidiary Southern Energy, completed
the purchase of 3,065 megawatts of generating assets in California from Pacific
Gas & Electric for approximately $801 million.

     In June 1999, SOUTHERN, through its subsidiary Southern Energy, completed
its $484 million acquisition of 1,776 megawatts of generating capacity from
Orange and Rockland Utilities, Inc. and Consolidated Edison Company of New York.
Also, in June 1999, Southern Energy announced that it signed an agreement to
sell SWEB's supply business to London Electricity for $256 million or (pound)160
million and the assumption of certain liabilities. Further, Southern Energy
acquired a 9.99% interest in Shandong International Power Development Company
Limited for $104 million.

     For information relating to Year 2000 readiness, see "YEAR 2000 READINESS"
below.



                                       13
<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). SOUTHERN has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings and other
comprehensive income.

     Reference is made to Notes (B) through (F), (H) through (M), (O) and (P) in
the "Notes to the Condensed Financial Statements" herein for discussion of
various contingencies and other matters which may affect future earnings
potential. Reference is also made to Part II - Item 1 - "Legal Proceedings"
herein.


YEAR 2000 READINESS

Year 2000 Challenge

In recent decades, computer programmers shortened the year portion of date
entries to two digits to save processing time and storage space. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach was used until the mid-1990s. Unless corrected before
the Year 2000, affected systems and devices containing a chip or microprocessor
with date and time functions could incorrectly process dates or the systems may
cease to function.

     SOUTHERN depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. SOUTHERN met its Year
2000 readiness goal, when in June 1999 it announced that systems critical to
generating and delivering electricity to its customers in the Southeast are
ready for 2000. Year 2000 ready means that a system or application is determined
suitable for continued use through the Year 2000 and beyond. Critical systems
include, but are not limited to, reactor control systems, safe shutdown systems,
turbine generator systems, control center computer systems, customer service
systems, energy management systems, and telephone switches and equipment.

Year 2000 Program and Status

SOUTHERN's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated what it believes to be adequate resources to address
the issue. The Millennium Project is a team of employees, IBM consultants, and
other contractors whose progress is reviewed regularly by a steering committee
of SOUTHERN executives.


                                       14

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     SOUTHERN's traditional business refers to the integrated utility services
within Alabama, Florida, Georgia, and Mississippi. For this traditional
business, the work was divided into two phases. Phase 1 began in 1996 and
consisted of identifying and assessing corporate assets related to software
systems and devices that contain a computer chip or clock. The first phase was
completed in June 1997. Phase 2 consisted of testing and remediating high
priority systems and devices. Also, contingency planning is included in this
phase. The second phase was completed on schedule in June 1999. The Millennium
Project will continue to monitor the affected computer systems, devices, and
applications into the Year 2000.

     For the traditional business, SOUTHERN completed the activities contained
in its work plan by function as follows:

                                                       Work Plan
                          -----------------------------------------------------
                                                     Remediation     Completion
                          Inventory    Assessment    and Testing        Date
Generation                    100%         100%          100%            6/99
Energy Management             100          100           100             6/99
Transmission and
   Distribution               100          100           100             1/99
Telecommunications            100          100           100             6/99
Corporate Applications        100          100           100             3/99
-------------------------------------------------------------------------------

     For the non-traditional business, Southern Energy has adopted a three-phase
plan to address the Year 2000 challenge at its North American and international
business units in which they have management control. The first phase consists
of awareness and planning, inventory and assessment, and it includes the
identification of potentially impacted systems and an assessment of their
individual Year 2000 readiness. The second phase, which includes testing,
remediation, and validation, consists of modification or replacement of impacted
equipment, and verification that those modifications have addressed the issue.
Contingency planning is the third phase, and it includes backup plans for
unexpected events with critical systems, staffing plans for critical date
rollovers, and plans to address external dependencies. Business units are using
Year 2000 readiness information received from suppliers, including fuel
suppliers, to determine if inventory adjustments are needed for the transition
period.

     The following three tables summarize the status of progress of Southern
Energy's North American and international business units as of June 30, 1999.

North American Business Units:

Phase                                      Status           Completion Date
------------------------------------------ ---------------- -------------------
Awareness and planning, inventory and      Complete         November 30, 1998
 assessment
Testing, remediation, and validation       Complete         June 30, 1999
Contingency planning                       Complete         June 30, 1999
------------------------------------------ ---------------- -------------------

                                       15

<PAGE>



                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


International Business Units where Southern Energy has management control:

Phase                                       Status         Projected Completion
------------------------------------------- -------------- --------------------
Awareness and planning, inventory and
 assessment                                 Complete       February 22, 1999
Testing, remediation, and validation        In progress    September 30, 1999
Contingency planning                        In progress    August 31, 1999
------------------------------------------- -------------- --------------------

Other International Business Units:

Phase                                      Status          Projected Completion
------------------------------------------ --------------- --------------------
Awareness and planning, inventory and
 assessment                                Complete        May 31, 1999
Testing, remediation, and validation       In progress     October 31, 1999
Contingency planning                       In progress     September 30, 1999
------------------------------------------ --------------- --------------------

     In a number of the international business units, Southern Energy is neither
the majority owner nor the managing concern. In these circumstances, Southern
Energy is providing technical assistance but does not control the schedule or
progress.

Year 2000 Costs

For the traditional business, current projected total costs for Year 2000
readiness are approximately $91 million, which includes $6 million of cost
billed to non-affiliated companies. These costs include labor necessary to
identify, test, and renovate affected devices and systems. From its inception
through June 30, 1999, the Year 2000 program costs, recognized primarily as
expense, amounted to $81 million based on SOUTHERN's ownership interest. In
addition to the traditional business costs, current projections for Year 2000
program costs are approximately $20 million for the non-traditional business -
based on SOUTHERN's ownership interest of which $14 million has been spent
through June 30, 1999.

Year 2000 Risks

SOUTHERN has implemented a detailed process to minimize the possibility of
service interruptions related to the Year 2000. Based on tests we have
conducted, we believe service interruptions related to Year 2000 challenges are
unlikely. These tests increase confidence, but do not guarantee error-free
operations. The company has taken what it believes to be prudent steps to
prepare for the Year 2000, and it expects any interruptions in service that may
occur within the traditional business service territory to be isolated and short
in duration, similar to service loss during a storm.


                                       16

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     SOUTHERN expects the risks associated with Year 2000 to be no more severe
than the scenarios that its electric system is routinely prepared to handle. The
most likely worst case scenario consists of the service loss of one of the
largest generating units and/or the service loss of any single bulk transmission
element in its traditional business service territory. There is a smaller risk
of sporadic and temporary fluctuations of power levels that would be aggravated
in the event of rapid and unscheduled changes to load patterns that resulted
from the activity of third parties. SOUTHERN has followed a proven methodology
for identifying and assessing software and devices containing potential Year
2000 challenges. Remediation and testing of those devices is complete. SOUTHERN
has prepared contingency plans as appropriate and has participated and will
continue to participate in North American Electric Reliability
Council-coordinated national drills during 1999.

     SOUTHERN continues to review the Year 2000 readiness of material third
parties that provide goods and services crucial to SOUTHERN's operations. Among
such critical third parties are fuel, transportation, telecommunications, water,
chemical, and other suppliers. There is some risk associated with
representations by third parties regarding their readiness and completion of
their own Year 2000 related work. Contingency plans based on the assessment of
each third party's ability to continue supplying critical goods and services to
SOUTHERN have been developed and are being reviewed.

     There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their own Year 2000 challenges. The risk
associated with the progress of some operations outside the United States is a
function of the local regulatory environment and the priorities of the entities
with management control. Year 2000 challenges are included in the list of due
diligence activities associated with acquisitions; there is some risk associated
with the subsequent validation of any given seller's representations.

Contingency Plans

Because of experience with hurricanes and other storms, the traditional business
is skilled at developing and using contingency plans in unusual circumstances.
As part of Year 2000 business continuity and contingency planning, SOUTHERN has
drawn on that experience to make risk assessments and develop additional plans
to deal specifically with Year 2000 challenges. SOUTHERN is identifying critical
operational locations, and scheduling key employees to be on duty at those
locations during the Year 2000 transition. SOUTHERN has already participated in
one of two North American Electric Reliability Council-coordinated national
drills during 1999, and has/is conducting additional drills to validate its
contingency plans. A successful drill focused on SOUTHERN's ability to maintain
critical voice and data exchange during partial loss of primary voice and data
communications systems. Because of the level of detail of the contingency
planning process, management feels that the contingency plans will keep any
service interruptions that may occur within the traditional business service
territory isolated and short in duration, similar to service loss during a
storm.

     Contingency planning efforts for the non-traditional business are complete
for North American assets and are underway for international assets. These
contingency plans are being developed by utilizing consistent formats and
guidelines.

     The material in this section constitutes forward-looking statements made
pursuant to the Private Securities Litigation Reform Act of 1995. There can be
no assurance that the actual results of SOUTHERN, its suppliers, or other third
party dependencies will not materially differ from expectations.



                                       17
<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



FINANCIAL CONDITION

Overview

Major changes in SOUTHERN's financial condition during the first six months of
1999 included $1.1 billion used for gross property additions to utility plant,
and $1.5 billion used for Southern Energy acquisitions. The funds for these
additions and other capital requirements were from operations and sales of
securities. See SOUTHERN's Condensed Consolidated Statements of Cash Flows for
further details.

     Reference is made to the SOUTHERN's Condensed Consolidated Statements of
Comprehensive Income herein for information relating to other comprehensive
income. During the first six months, Southern Energy recognized $116 million of
after-tax foreign exchange translation losses in other comprehensive income
which were principally related to shifts in exchange rates between the U.S.
dollar and the pound sterling and the Deutschemark, and to the 50% devaluation
of the Brazilian Real.

Financing Activities

During the first six months of 1999, retirements and redemptions of the
operating companies' first mortgage bonds and preferred stock totaled $525
million and $86 million, respectively. In February 1999, Alabama Power Capital
Trust III, a statutory business trust established for the purpose of holding
ALABAMA's junior subordinated notes and issuing trust preferred securities and
common securities, sold $50 million of its capital auction preferred securities
which are guaranteed by ALABAMA. Also, in February 1999, Georgia Power Capital
Trust IV, a statutory business trust established for the purpose of holding
GEORGIA's junior subordinated notes and issuing trust preferred securities and
common securities, sold $200 million of its 6.85% trust preferred securities,
which are guaranteed by GEORGIA. Additionally, in March 1999, GEORGIA issued
$100 million of 6 5/8% senior notes due March 31, 2039. The proceeds from this
issuance were used to repay a portion of GEORGIA's outstanding short-term
indebtedness.

     In May 1999, ALABAMA issued $200 million of 6.75% senior notes due June 30,
2039. The proceeds were used to repay a portion of its outstanding short-term
indebtedness and for other general corporate purposes. Also, in May 1999,
GEORGIA sold, through public authorities, $53 million of 5.45% pollution control
revenue bonds due May 1, 2034; $85 million of 5.40% pollution control revenue
bonds due May 1, 2034; and $100 million of 5.25% pollution control revenue bonds
due May 1, 2034. The proceeds of these sales were used to redeem $50 million
aggregate principal amount of 6.35% pollution control revenue bonds in June
1999; $125 million aggregate principal amount of 6.60% pollution control revenue
bonds in July 1999; and $60 million aggregate principal amount of 6 3/8%
pollution control revenue bonds in August 1999. In June 1999, ALABAMA sold,
through public authorities, $101.6 million aggregate principal amount of
variable rate pollution control revenue refunding bonds due June 1, 2022. The
proceeds from the sale will be applied to the full redemption of the Series 1994
6 1/2% pollution control revenue refunding bonds on or about September 1, 1999.

     In July 1999, Southern Energy issued $700 million aggregate principal
amount of senior notes which consisted of $200 million of 7.40% senior notes due
2004 and $500 million of 7.90% senior notes due 2009. Proceeds received from the
sales of these notes are being used for general corporate purposes, including
repayment of short-term debt.


                                       18

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     During the first six months of 1999, SOUTHERN raised $24 million from the
issuance of 885 thousand shares of common stock under SOUTHERN's various stock
plans. See Note (P) in the "Notes to the Condensed Financial Statements" herein
for discussion of programs to repurchase SOUTHERN's common stock. The market
price of SOUTHERN's common stock at June 30, 1999 was $26.50 per share and the
book value was $13.81 per share, representing a market-to-book ratio of 192%,
compared to $29.0625, $14.04 and 207%, respectively, at the end of 1998. The
dividend for the second quarter of 1999 was $0.335 per share.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Capital
Requirements for Construction", "Other Capital Requirements" and "Environmental
Matters" of SOUTHERN in the Form 10-K for a description of the Southern electric
system's capital requirements for its construction program, sinking fund
requirements and maturing debt, and environmental compliance efforts.
Approximately $1.1 billion will be required by June 30, 2000, for redemptions
and maturities of long-term debt. Also, the operating companies plan to
continue, to the extent possible, a program to retire higher-cost debt and
preferred stock and replace these securities with lower-cost capital.

Sources of Capital

In addition to the financing activities previously described, SOUTHERN may
require additional equity capital during the remainder of the year. The amounts
and timing of additional equity capital to be raised in 1999, as well as in
subsequent years, will be contingent on SOUTHERN's investment opportunities. The
operating companies plan to obtain the funds required for construction and other
purposes from sources similar to those used in the past. The amount, type and
timing of any financings--if needed--will depend upon maintenance of adequate
earnings, regulatory approval, prevailing market conditions and other factors.
See Item 1 - BUSINESS "Financing Programs" in the Form 10-K for additional
information.

     To meet short-term cash needs and contingencies, the SOUTHERN system had at
June 30, 1999, approximately $449 million of cash and cash equivalents and
approximately $6.1 billion of unused credit arrangements with banks of which
$124.7 million expired on July 14, 1999. Of the remaining $5.9 billion, $1.4
billion of such arrangements provide liquidity support to variable rate
pollution control bonds. At June 30, 1999, the system companies had outstanding
approximately $1.2 billion of short-term notes payable and $2.8 billion of
commercial paper. Management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.

     See Note (D) in the "Notes to the Condensed Financial Statements" herein
for discussion of financial derivative contracts entered into by SOUTHERN.



                                       19
<PAGE>


                              ALABAMA POWER COMPANY


                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                          ALABAMA POWER COMPANY
                                                CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                                                     (Stated in Thousands of Dollars)

                                                                      For the Three Months                For the Six Months
                                                                         Ended June 30,                     Ended June 30,
                                                                  -------------------------------   -------------------------------
                                                                     1999              1998             1999             1998
                                                                  -------------   ---------------   --------------  ---------------

OPERATING REVENUES:
<S>                                                                  <C>               <C>             <C>              <C>
Revenues                                                             $ 800,433         $ 850,330       $1,467,656       $1,524,625
Revenues from affiliates                                                22,183            13,385           69,284           55,595
                                                                  -------------   ---------------   --------------  ---------------
Total operating revenues                                               822,616           863,715        1,536,940        1,580,220
                                                                  -------------   ---------------   --------------  ---------------

OPERATING EXPENSES:
Operation--
  Fuel                                                                 211,820           215,623          399,834          408,645
  Purchased power from non-affiliates                                   17,995            25,150           25,575           42,685
  Purchased power from affiliates                                       36,091            43,617           63,518           62,249
  Other                                                                134,602           125,442          252,498          240,255
Maintenance                                                             75,039            86,803          145,813          150,336
Depreciation and amortization                                           87,634            86,141          174,816          172,380
Taxes other than income taxes                                           50,601            46,121          103,662           95,560
Federal and state income taxes                                          55,880            56,096           94,580           98,653
                                                                  -------------   ---------------   --------------  ---------------
Total operating expenses                                               669,662           684,993        1,260,296        1,270,763
                                                                  -------------   ---------------   --------------  ---------------
OPERATING INCOME                                                       152,954           178,722          276,644          309,457
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                      2,445               610            4,433              895
Equity in earnings of subsidiaries                                         709             1,882            1,477            3,405
Interest income                                                         14,322            24,828           23,768           38,498
Other, net                                                              (5,241)           (8,090)         (12,732)         (17,007)
Income taxes applicable to other income                                    312            (4,493)           1,236           (2,316)
                                                                  -------------   ---------------   --------------  ---------------
INCOME BEFORE INTEREST CHARGES AND OTHER                               165,501           193,459          294,826          332,932
                                                                  -------------   ---------------   --------------  ---------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                              45,966            47,713           91,026           92,431
Allowance for debt funds used during construction                       (3,592)             (900)          (5,333)          (1,552)
Interest on interim obligations                                          2,885             2,941            5,560            7,347
Amortization of debt discount, premium and expense, net                  2,772            27,457            5,490           29,881
Other interest charges                                                  14,379            12,615           22,211           26,235
Distributions on preferred securities of subsidiary companies            6,202             5,589           12,033           11,177
                                                                  -------------   ---------------   --------------  ---------------
Interest charges and other, net                                         68,612            95,415          130,987          165,519
                                                                  -------------   ---------------   --------------  ---------------
NET INCOME                                                              96,889            98,044          163,839          167,413
DIVIDENDS ON PREFERRED STOCK                                             3,852             3,294            7,727            6,622
                                                                  -------------   ---------------   --------------  ---------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK                                                        $93,037           $94,750        $ 156,112        $ 160,791
                                                                  =============   ===============   ==============  ===============



                   The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>

                                                                    21

<PAGE>

<TABLE>
<CAPTION>

                                                   ALABAMA POWER COMPANY
                                       CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                              (Stated in Thousands of Dollars)

                                                                                                    For the Six Months
                                                                                                      Ended June 30,
                                                                                              -------------------------------
                                                                                                  1999              1998
                                                                                              -------------     -------------

OPERATING ACTIVITIES:
<S>                                                                                              <C>               <C>
Net income                                                                                       $ 163,839         $ 167,413
Adjustments to reconcile net income to net cash provided by operating activities--
  Depreciation and amortization                                                                    204,381           226,381
  Deferred income taxes and investment tax credits, net                                             15,517            (5,789)
  Allowance for equity funds used during construction                                               (4,433)             (895)
  Other, net                                                                                        42,999            12,129
  Changes in certain current assets and liabilities--
    Receivables, net                                                                               (20,610)          (35,656)
    Inventories                                                                                    (37,859)          (20,149)
    Prepayments                                                                                    (27,540)          (19,814)
    Payables                                                                                       (71,378)          (33,027)
    Taxes accrued                                                                                   49,419            46,385
    Energy cost recovery, retail                                                                     4,653           (17,097)
    Other                                                                                          (30,321)          (28,146)
                                                                                              -------------     -------------
Net cash provided from operating activities                                                        288,667           291,735
                                                                                              -------------     -------------
INVESTING ACTIVITIES:
Gross property additions                                                                          (321,236)         (301,276)
Other                                                                                              (46,039)          (37,307)
                                                                                              -------------     -------------
Net cash used for investing activities                                                            (367,275)         (338,583)
                                                                                              -------------     -------------
FINANCING ACTIVITIES:
Proceeds--
  Capital contributions                                                                                  -            30,000
  Company obligated mandatorily redeemable preferred securities                                     50,000                 -
  Pollution control bonds                                                                          101,650           106,790
  Other long-term debt                                                                             200,000           390,000
Retirements--
  Preferred stock                                                                                  (50,000)                -
  Pollution control bonds                                                                           (1,000)                -
  First mortgage bonds                                                                            (300,000)         (198,500)
  Other long-term debt                                                                                (640)             (510)
Interim obligations, net                                                                           276,751            30,638
Special deposits                                                                                  (101,650)         (106,790)
Payment of preferred stock dividends                                                                (7,997)           (6,705)
Payment of common stock dividends                                                                 (196,400)         (180,900)
Miscellaneous                                                                                      (10,653)          (20,529)
                                                                                              -------------     -------------
Net cash provided from (used for) financing activities                                             (39,939)           43,494
                                                                                              -------------     -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                           (118,547)           (3,354)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                   134,248            23,957
                                                                                              =============     =============
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                        $ 15,701          $ 20,603
                                                                                              =============     =============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
  Interest (net of amount capitalized)                                                            $114,401          $112,584
  Income taxes                                                                                      41,660            98,756



            The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>

                                                             22
<PAGE>
<TABLE>
<CAPTION>
                                                  ALABAMA POWER COMPANY
                                                 CONDENSED BALANCE SHEETS
                                             (Stated in Thousands of Dollars)

                                                          ASSETS

                                                                                         At June 30,
                                                                                            1999             At December 31,
                                                                                         (Unaudited)            1998
                                                                                       ---------------     ----------------
UTILITY PLANT:
<S>                                                                                       <C>                  <C>
Plant in service, at original cost                                                        $11,484,932          $11,352,838
Less accumulated provision for depreciation                                                 4,844,978            4,666,513
                                                                                       ---------------     ----------------
                                                                                            6,639,954            6,686,325
Nuclear fuel, at amortized cost                                                                87,476               95,575
Construction work in progress                                                                 673,678              525,359
                                                                                       ---------------     ----------------
                                                                                       ---------------     ----------------
Total                                                                                       7,401,108            7,307,259
                                                                                       ---------------     ----------------

OTHER PROPERTY AND INVESTMENTS:
Equity investments in subsidiaries                                                             34,346               34,298
Nuclear decommissioning trusts, at market                                                     267,113              232,183
Miscellaneous                                                                                  11,943               12,915
                                                                                       ---------------     ----------------
Total                                                                                         313,402              279,396
                                                                                       ---------------     ----------------

CURRENT ASSETS:
Cash and cash equivalents                                                                      15,701              134,248
Special deposits                                                                              101,650                    -
Receivables --
  Customer accounts receivable                                                                366,575              343,630
  Other accounts and notes receivable                                                          39,347               32,394
  Affiliated companies                                                                         45,447               39,981
  Accumulated provision for uncollectible accounts                                             (1,262)              (1,855)
Refundable income taxes                                                                        32,117               52,117
Fossil fuel stock, at average cost                                                            115,292               83,238
Materials and supplies, at average cost                                                       155,474              149,669
Prepayments                                                                                    44,700               17,160
Vacation pay deferred                                                                          28,390               28,390
                                                                                       ---------------     ----------------
Total                                                                                         943,431              878,972
                                                                                       ---------------     ----------------


DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges related to income taxes                                                      354,378              362,953
Debt expense, being amortized                                                                   9,554                8,602
Premium on reacquired debt, being amortized                                                    84,008               83,440
Prepaid pension costs                                                                         191,728              169,393
Department of Energy assessments                                                               31,088               31,088
Miscellaneous                                                                                  98,813              104,595
                                                                                       ---------------     ----------------
Total                                                                                         769,569              760,071
                                                                                       ---------------     ----------------

TOTAL ASSETS                                                                               $9,427,510           $9,225,698
                                                                                       ===============     ================




           The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>

                                                            23

<PAGE>
<TABLE>
<CAPTION>


                                                  ALABAMA POWER COMPANY
                                                 CONDENSED BALANCE SHEETS
                                             (Stated in Thousands of Dollars)

                                              CAPITALIZATION AND LIABILITIES

                                                                                         At June 30,
                                                                                            1999             At December 31,
                                                                                         (Unaudited)            1998
                                                                                       ---------------     ----------------
CAPITALIZATION:
<S>                                                                                         <C>                  <C>
Common stock equity --
Common stock (par value $40 per share) --
  authorized 6,000,000 shares; outstanding 5,608,955 shares                                 $ 224,358            $ 224,358
Paid-in capital                                                                             1,334,645            1,334,645
Premium on preferred stock                                                                         99                   99
Retained earnings                                                                           1,184,854            1,224,965
                                                                                       ---------------     ----------------
                                                                                            2,743,956            2,784,067
Preferred stock                                                                               317,512              317,512
Company obligated mandatorily redeemable preferred securities of
  subsidiary trusts holding Company Junior Subordinated Notes                                 347,000              297,000
Long-term debt                                                                              2,741,504            2,646,566
                                                                                       ---------------     ----------------
Total                                                                                       6,149,972            6,045,145
                                                                                       ---------------     ----------------

CURRENT LIABILITIES:
Preferred stock due within one year                                                                 -               50,000
Long-term debt due within one year                                                            372,649              471,209
Commercial paper                                                                              276,751                    -
Accounts payable --
  Affiliated companies                                                                         86,313               79,844
  Other                                                                                       106,166              188,074
Customer deposits                                                                              30,039               29,235
Taxes accrued--
  Federal and state income                                                                     78,694               82,219
  Other                                                                                        50,810               17,559
Interest accrued                                                                               28,709               38,166
Vacation pay accrued                                                                           28,390               28,390
Miscellaneous                                                                                  56,979               79,095
                                                                                       ---------------     ----------------
Total                                                                                       1,115,500            1,063,791
                                                                                       ---------------     ----------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                           1,240,163            1,202,971
Accumulated deferred investment tax credits                                                   265,988              271,611
Prepaid capacity revenues, net                                                                 88,400               96,080
Department of Energy assessments                                                               27,202               27,202
Deferred credits related to income taxes                                                      305,176              315,735
Natural disaster reserve                                                                       17,466               19,385
Miscellaneous                                                                                 217,643              183,778
                                                                                       ---------------     ----------------
Total                                                                                       2,162,038            2,116,762
                                                                                       ---------------     ----------------

TOTAL CAPITALIZATION AND LIABILITIES                                                       $9,427,510           $9,225,698
                                                                                       ===============     ================



           The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>

                                        24
<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                   SECOND QUARTER 1999 vs. SECOND QUARTER 1998
                                       AND
                     YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998


RESULTS OF OPERATIONS

Earnings

ALABAMA's net income after dividends on preferred stock for the second quarter
and year-to-date 1999 was $93.0 million and $156.1 million, respectively,
compared to $94.8 million and $160.8 million for the corresponding periods of
1998. Earnings for the current quarter and year-to-date decreased $1.7 million
or 1.8% and $4.7 million or 2.9%, respectively, due primarily to decreases in
operating revenues.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                           Increase (Decrease)
                                                      ---------------------------------------------------------------
                                                              Second Quarter                   Year-To-Date
                                                      ------------------------------- -------------------------------
                                                        (in thousands)        %       (in thousands)          %
<S>                                                       <C>                <C>          <C>                <C>
Revenues.........................................         $(49,897)          (5.9)        $(56,969)          (3.7)
Revenues from affiliates.........................            8,798           65.7           13,689           24.6
Purchased power from non-affiliates..............           (7,155)         (28.4)         (17,110)         (40.1)
Purchased power from affiliates..................           (7,526)         (17.3)           1,269            2.0
Other operation expense..........................            9,160            7.3           12,243            5.1
Maintenance expense..............................          (11,764)         (13.6)          (4,523)          (3.0)
Interest income..................................          (10,506)         (42.3)         (14,730)         (38.3)
Amortization of debt discount, premium and
   expense, net                                            (24,685)         (89.9)         (24,391)         (81.6)
</TABLE>

     Revenues. Including fuel revenues, revenues for the second quarter and
year-to-date 1999 were down from the corresponding periods in 1998 due primarily
to decreases in retail energy sales and revenues from unit power sales. Retail
energy sales for the current quarter and year-to-date 1999 decreased by 3.6% and
1.1%, respectively, due to milder weather in the second quarter of 1999 as
compared to extremely hot weather in the second quarter of 1998 and lower
industrial sales. Revenues from unit power sales for the current quarter and
year-to-date 1999 decreased 22.3% and 18.4%, respectively, as a result of lower
energy sales and a lowering of the equity return under formula rate contracts.
See Note (F) in the "Notes to the Condensed Financial Statements" herein for
further details. Retail revenues, excluding those revenues which represent the
recovery of fuel expense and certain other expenses and do not affect income,
decreased $12.7 million for the current quarter and $10.6 million year-to-date.

     Revenues from affiliates and Purchased power from affiliates. Revenues from
sales to affiliated companies within the Southern electric system, as well as
purchases of energy, will vary from period to period depending on demand and the
availability and cost of generating resources at each company. These
transactions did not have a significant impact on earnings.



                                       25
<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Purchased power from non-affiliates. These expenses dropped during this
quarter and year-to-date 1999 when compared to the corresponding periods of 1998
due primarily to increased purchases in 1998 related to power marketing
activities, a majority of which were resold to non-affiliated third parties.
These transactions had no significant effect on net income.

     Other operation expense. Current quarter and year-to-date 1999 increases
are due primarily to higher administrative and general expenses.

     Maintenance expense. These expenses decreased for the current quarter and
year-to-date 1999 due mainly to decreases in steam and distribution expenses.
For year-to-date 1999, the effect of these decreases was partially offset by an
increase in transmission expenses.

     Interest income. The decreases for the current quarter and year-to-date
1999 are primarily attributed to the recording by ALABAMA during the second
quarter of 1998 of its portion of the tax settlement between SOUTHERN and the
Internal Revenue Service. For additional information, see Note 3 to the
financial statements of ALABAMA under the caption "Tax Litigation" in Item 8 of
the Form 10-K.

     Amortization of debt discount, premium and expense, net. The decreases for
the current quarter and year-to-date when compared to the same periods in 1998
are directly related to accelerated amortization in 1998 of premiums incurred to
refinance high-cost debt. For additional information, see Note 3 to the
financial statements of ALABAMA under the caption "Retail Rate Adjustment
Procedures" in Item 8 of the Form 10-K.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in
the Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of ALABAMA in the Form 10-K.

     The U.S. Environmental Protection Agency is conducting an industry-wide
investigation concerning the compliance status of certain coal-fired generating
facilities, including certain of ALABAMA's units, under the new source review
provisions of the Clean Air Act. Although the outcome of this matter cannot now
be determined, if adverse it could result in substantial penalties and
additional capital costs.


                                       26
<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     ALABAMA's plans to achieve Year 2000 readiness have been implemented and
are included in the SOUTHERN system's Year 2000 Program. The costs related to
ALABAMA's Year 2000 program, including ALABAMA's share of costs of Southern
Nuclear Operating Company, are expected to be $37.0 million. From its inception
through June 30, 1999, the Year 2000 program costs, recognized primarily as
expense, amounted to $32.5 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
Condition - "Future Earnings Potential" herein.

     The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). ALABAMA has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in reported earnings.

     Reference is made to Notes (B), (C), and (F) through (J) in the "Notes to
the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.


FINANCIAL CONDITION

Overview

Major changes in ALABAMA's financial condition during the first six months of
1999 included the addition of approximately $321.2 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operating activities. See ALABAMA's Condensed Statements of Cash Flows for
further details.

Financing Activities

During the first six months of 1999, redemptions of first mortgage bonds and
preferred stock by ALABAMA totaled $300 million and $50 million, respectively.
In February 1999, Alabama Power Capital Trust III (the "Trust"), a statutory
business trust established for the purpose of holding ALABAMA's junior
subordinated notes and issuing trust preferred securities and common securities,
sold $50 million of its capital auction preferred securities which are
guaranteed by ALABAMA. The Trust invested the proceeds in Series C junior
subordinated notes. The net proceeds received by ALABAMA were used to repay a
portion of ALABAMA's outstanding short-term indebtedness. See Note (G) in the "
Notes to the Condensed Financial Statements" herein for additional information.
In May 1999, ALABAMA issued $200 million of 6.75% senior notes due June 30,
2039. The proceeds were used to repay a portion of its outstanding short-term
indebtedness and for other general corporate purposes. In June 1999, ALABAMA
sold, through public authorities, $101.6 million aggregate principal amount of
variable rate pollution control revenue refunding bonds due June 1, 2022. The
proceeds from the sale will be applied to the full redemption of the Series 1994
6 1/2% pollution control revenue refunding bonds on or about September 1, 1999.

                                       27

<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     ALABAMA will continue to retire higher-cost debt and preferred stock and
replace these securities with lower-cost capital as market conditions permit.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of ALABAMA
under "Capital Requirements," "Other Capital Requirements" and "Environmental
Matters" in the Form 10-K for a description of ALABAMA's capital requirements
for its construction program, maturing debt and environmental compliance
efforts.

Sources of Capital

In addition to the financing activities previously described herein, ALABAMA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, ALABAMA had at June 30,
1999, approximately $15.7 million of cash and cash equivalents and had unused
committed lines of credit of approximately $1 billion of which $124.7 million
expired on July 14, 1999. Of the remaining $899.7 million of committed lines,
$418.7 million may be borrowed upon only to fund purchase obligations relating
to variable rate pollution control bonds. Additionally, in July 1999, ALABAMA
entered into an Extendible Commercial Note program. ALABAMA has regulatory
authority for up to $750 million of short-term borrowings. At June 30, 1999,
ALABAMA had outstanding $276.8 million of commercial paper.

                                       28
<PAGE>





                              ARTHUR ANDERSEN LLP


                                                                      Exhibit 1





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




TO ALABAMA POWER COMPANY:

     We have reviewed the accompanying condensed balance sheet of ALABAMA POWER
COMPANY as of June 30, 1999, and the related condensed statements of income for
the three-month and six-month periods ended June 30, 1999 and 1998 and cash
flows for the six-month periods ended June 30, 1999 and 1998. These financial
statements are the responsibility of the Company's management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.

     We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1998
(not presented herein) and, in our report dated February 10, 1999, we expressed
an unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1998 is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.



/s/  Arthur Andersen LLP
Birmingham, Alabama
August 9, 1999

                                       29

<PAGE>





                              GEORGIA POWER COMPANY



                                       30


<PAGE>

<TABLE>
<CAPTION>
                              GEORGIA POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                    For the Three Months               For the Six Months
                                                                       Ended June 30,                    Ended June 30,
                                                               -------------------------------   -------------------------------
                                                                    1999            1998             1999             1998
                                                               ---------------  --------------   --------------   --------------

OPERATING REVENUES:
<S>                                                                <C>             <C>              <C>              <C>
Revenues                                                           $1,077,066      $1,206,151       $2,000,090       $2,185,485
Revenues from affiliates                                               14,482          20,163           22,388           24,972
                                                               ---------------  --------------   --------------   --------------
Total operating revenues                                            1,091,548       1,226,314        2,022,478        2,210,457
                                                                ---------------  --------------   --------------   --------------

OPERATING EXPENSES:
Operation--
  Fuel                                                                237,574         248,030          415,786          424,661
  Purchased power from non-affiliates                                  47,752          58,754           79,910          104,228
  Purchased power from affiliates                                      43,850          36,677           98,771           80,362
  Other                                                               184,321         194,267          352,603          363,692
Maintenance                                                            90,937          91,089          182,473          172,038
Depreciation and amortization                                         139,289         255,840          271,724          414,434
Taxes other than income taxes                                          49,151          55,239           98,153          107,434
Federal and state income taxes                                         90,765          97,994          154,145          178,643
                                                               ---------------  --------------   --------------   --------------
Total operating expenses                                              883,639       1,037,890        1,653,565        1,845,492
                                                               ---------------  --------------   --------------   --------------
OPERATING INCOME                                                      207,909         188,424          368,913          364,965
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                         -               -                -              178
Equity in earnings of unconsolidated subsidiary                           731             758            1,464            1,840
Interest income                                                         2,115          64,358            2,365           64,911
Other, net                                                             (3,389)        (23,376)         (10,026)         (28,499)
Income taxes applicable to other income                                   397         (15,755)           2,956          (13,212)
                                                               ---------------  --------------   --------------   --------------
INCOME BEFORE INTEREST CHARGES                                        207,763         214,409          365,672          390,183
                                                               ---------------  --------------   --------------   --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                             42,872          45,252           83,983           90,308
Allowance for debt funds used during construction                      (3,128)         (2,174)          (5,310)          (4,002)
Interest on interim obligations                                         5,618           4,767            9,834            8,513
Amortization of debt discount, premium and expense, net                 3,900           3,320            7,600            6,651
Other interest charges                                                  2,726          11,120            6,037           15,134
Distributions on preferred securities of subsidiary companies          17,026          13,601           31,997           27,125
                                                               ---------------  --------------   --------------   --------------
Interest charges and other, net                                        69,014          75,886          134,141          143,729
                                                               ---------------  --------------   --------------   --------------
NET INCOME                                                            138,749         138,523          231,531          246,454
DIVIDENDS ON PREFERRED STOCK                                              178           1,837            1,379            3,864
                                                               ---------------  --------------   --------------   --------------
NET INCOME AFTER DIVIDENDS ON
 PREFERRED STOCK                                                    $ 138,571       $ 136,686        $ 230,152        $ 242,590
                                                               ===============  ==============   ==============   ==============




                 The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>

                                                                  31
<PAGE>
<TABLE>
<CAPTION>
                                                   GEORGIA POWER COMPANY
                                       CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                              (Stated in Thousands of Dollars)

                                                                                                    For the Six Months
                                                                                                      Ended June 30,
                                                                                              -------------------------------
                                                                                                  1999              1998
                                                                                              -------------     -------------

OPERATING ACTIVITIES:
<S>                                                                                              <C>               <C>
Net income                                                                                       $ 231,531         $ 246,454
Adjustments to reconcile net income to net cash provided by operating activities--
  Depreciation and amortization                                                                    280,856           450,537
  Deferred income taxes and investment tax credits, net                                              6,396           (23,316)
  Other, net                                                                                        33,791            27,946
  Changes in certain current assets and liabilities--
    Receivables, net                                                                                 9,255          (293,473)
    Inventories                                                                                    (37,670)           (5,854)
    Payables                                                                                       (66,228)           (1,764)
    Taxes accrued                                                                                   24,785           108,327
    Energy cost recovery, retail                                                                    (4,262)          (11,196)
    Other                                                                                           16,133            19,240
                                                                                              -------------     -------------
Net cash provided from operating activities                                                        494,587           516,901
                                                                                              -------------     -------------
INVESTING ACTIVITIES:
Gross property additions                                                                          (353,516)         (207,796)
Other                                                                                              (44,126)           15,641
                                                                                              -------------     -------------
Net cash used for investing activities                                                            (397,642)         (192,155)
                                                                                              -------------     -------------
FINANCING ACTIVITIES:
Proceeds--
  Preferred securities                                                                             200,000                 -
  Pollution control bonds                                                                          238,000            89,990
  Senior notes                                                                                     100,000           145,000
Retirements--
  Preferred stock                                                                                  (35,732)          (40,679)
  First mortgage bonds                                                                            (209,000)         (220,460)
  Pollution control bonds                                                                          (50,000)          (89,990)
  Capital leases                                                                                      (215)                -
Special deposits - redemption funds                                                               (186,785)                -
Interim obligations, net                                                                           147,701             9,655
Payment of preferred stock dividends                                                                  (378)           (6,628)
Payment of common stock dividends                                                                 (266,800)         (264,400)
Miscellaneous                                                                                      (25,429)           (6,703)
                                                                                              -------------     -------------
Net cash used for financing activities                                                             (88,638)         (384,215)
                                                                                              -------------     -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                              8,307           (59,469)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                    16,272            83,333
                                                                                              =============     =============
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                        $ 24,579          $ 23,864
                                                                                              =============     =============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized)                                                              $126,412          $137,345
Income taxes (net of refunds)                                                                       88,524            98,165




            The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>

                                                             32
<PAGE>
<TABLE>
<CAPTION>
                                                  GEORGIA POWER COMPANY
                                                 CONDENSED BALANCE SHEETS
                                             (Stated in Thousands of Dollars)

                                                          ASSETS

                                                                                         At June 30,
                                                                                            1999            At December 31,
                                                                                         (Unaudited)            1998
                                                                                       ---------------     ----------------
UTILITY PLANT:
<S>                                                                                       <C>                  <C>
Plant in service                                                                          $15,590,726          $15,441,146
Less accumulated provision for depreciation                                                 6,327,358            6,109,331
                                                                                       ---------------     ----------------
                                                                                            9,263,368            9,331,815
Nuclear fuel, at amortized cost                                                               119,931              121,169
Construction work in progress                                                                 315,163              189,849
                                                                                       ---------------     ----------------
Total                                                                                       9,698,462            9,642,833
                                                                                       ---------------     ----------------

OTHER PROPERTY AND INVESTMENTS:
Southern Electric Generating Company, at equity                                                24,394               24,360
Nuclear decommissioning trusts, at market                                                     331,035              284,536
Miscellaneous                                                                                  32,333               34,781
                                                                                       ---------------     ----------------
Total                                                                                         387,762              343,677
                                                                                       ---------------     ----------------

CURRENT ASSETS:
Cash and cash equivalents                                                                      24,579               16,272
Receivables --
  Customer accounts receivable                                                                442,173              439,420
  Other accounts and notes receivable                                                         255,838               99,574
  Affiliated companies                                                                         24,159               16,817
  Accumulated provision for uncollectible accounts                                             (5,000)              (5,500)
Fossil fuel stock, at average cost                                                            138,449              104,133
Materials and supplies, at average cost                                                       246,831              243,477
Prepayments                                                                                    23,025               29,670
Vacation pay deferred                                                                          42,687               43,610
                                                                                       ---------------     ----------------
Total                                                                                       1,192,741              987,473
                                                                                       ---------------     ----------------


DEFERRED CHARGES:
Deferred charges related to income taxes                                                      595,630              604,488
Premium on reacquired debt, being amortized                                                   181,644              173,858
Prepaid pension costs                                                                         124,931              103,606
Debt expense, being amortized                                                                  61,872               51,261
Miscellaneous                                                                                 137,013              126,422
                                                                                       ---------------     ----------------
Total                                                                                       1,101,090            1,059,635
                                                                                       ---------------     ----------------

TOTAL ASSETS                                                                              $12,380,055          $12,033,618
                                                                                       ===============     ================




           The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>

                                                            33

<PAGE>
<TABLE>
<CAPTION>


                                                  GEORGIA POWER COMPANY
                                                 CONDENSED BALANCE SHEETS
                                             (Stated in Thousands of Dollars)

                                              CAPITALIZATION AND LIABILITIES

                                                                                         At June 30,
                                                                                            1999            At December 31,
                                                                                         (Unaudited)            1998
                                                                                       ---------------     ----------------
CAPITALIZATION:
<S>                                                                                        <C>                   <C>
Common stock equity --
Common stock (without par value) --
 authorized 15,000,000 shares; outstanding 7,761,500 shares                                 $ 344,250            $ 344,250
Paid-in capital                                                                             1,660,223            1,660,206
Premium on preferred stock                                                                         40                  158
Retained earnings                                                                           1,742,907            1,779,558
                                                                                       ---------------     ----------------
                                                                                            3,747,420            3,784,172
Preferred stock                                                                                15,451               15,527
Company obligated mandatorily redeemable preferred securities
  of subsidiaries substantially all of whose assets are junior
  subordinated debentures or notes                                                            889,250              689,250
Long-term debt                                                                              2,743,575            2,744,362
                                                                                       ---------------     ----------------
Total                                                                                       7,395,696            7,233,311
                                                                                       ---------------     ----------------

CURRENT LIABILITIES:
Preferred stock due within one year                                                                 -               35,656
Long-term debt due within one year                                                            480,550              399,429
Notes payable to banks                                                                        318,216              117,634
Commercial paper                                                                              170,337              223,218
Accounts payable --
  Affiliated companies                                                                         66,576               75,774
  Other                                                                                       242,067              326,317
Customer deposits                                                                              72,968               69,584
Taxes accrued--
  Federal and state income                                                                     72,069               15,801
  Other                                                                                        90,876              122,359
Interest accrued                                                                               60,315               60,187
Miscellaneous                                                                                 109,554              100,793
                                                                                       ---------------     ----------------
Total                                                                                       1,683,528            1,546,752
                                                                                       ---------------     ----------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                           2,248,726            2,249,613
Accumulated deferred investment tax credits                                                   374,514              381,914
Deferred credits related to income taxes                                                      273,911              284,017
Employee benefits provisions                                                                  187,659              177,148
Miscellaneous                                                                                 216,021              160,863
                                                                                       ---------------     ----------------
Total                                                                                       3,300,831            3,253,555
                                                                                       ---------------     ----------------

TOTAL CAPITALIZATION AND LIABILITIES                                                      $12,380,055          $12,033,618
                                                                                       ===============     ================




           The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>

                                        34



<PAGE>



                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                   SECOND QUARTER 1999 vs. SECOND QUARTER 1998
                                       AND
                     YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998


RESULTS OF OPERATIONS

Earnings

GEORGIA's net income after dividends on preferred stock for the second quarter
and year-to-date 1999 was $138.6 million and $230.2 million, respectively,
compared to $136.7 million and $242.6 million for the same periods in 1998.
Second quarter 1999 earnings increased slightly by $1.9 million or 1.4% while
year-to-date 1999 earnings decreased by $12.4 million or 5.1% due primarily to
lower operating revenues. Operating revenues were affected by fixed rate
reductions ordered by the 1998 Georgia PSC rate order and milder temperatures as
compared to 1998. Under the new order, fixed rate reductions and accelerated
amortization are being recognized ratably throughout 1999. During 1998, variable
accelerated depreciation recorded under the previous accounting order was
primarily recognized during the higher revenue months. See Note (K) in the
"Notes to the Condensed Financial Statements" herein for further details
regarding the retail rate order.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>

                                                                           Increase (Decrease)
                                                      ---------------------------------------------------------------
                                                              Second Quarter                   Year-To-Date
                                                      ------------------------------- -------------------------------
                                                        (in thousands)        %       (in thousands)          %
<S>                                                      <C>                <C>          <C>                 <C>
Revenues.........................................        $(129,085)         (10.7)       $(185,395)          (8.5)
Purchased power from non-affiliates..............          (11,002)         (18.7)         (24,318)         (23.3)
Depreciation and amortization....................         (116,551)         (45.6)        (142,710)         (34.4)
Interest income..................................          (62,243)         (96.7)         (62,546)         (96.4)
Other, net.......................................           19,987           85.5           18,473           64.8
Income taxes applicable to other income..........           16,152          102.5           16,168          122.4
Other interest charges...........................           (8,394)         (75.5)          (9,097)         (60.1)
Distributions on preferred securities
    of subsidiary companies                                  3,425           25.2            4,872           18.0
</TABLE>


     Revenues. Revenues within the service area decreased by $149.7 million and
$190.6 million, for the second quarter and year-to-date 1999, respectively, when
compared to the same periods in 1998. Retail revenues, excluding fuel revenues
which generally do not affect income, decreased $129.4 million and $176.8
million, respectively, for the second quarter and year-to-date 1999 when
compared to the corresponding periods in 1998 primarily due to retail rate
reductions ordered by the Georgia PSC and milder weather in 1999 compared to
1998. Energy sales in the second quarter and year-to-date 1999 decreased by 2.9%
for each of these periods when compared to the same periods in 1998 due to mild
temperatures. In particular, residential energy sales were down by 10.4% and
5.5%, respectively, for the second quarter and year-to-date.


                                       35

<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     Wholesale revenues within the service area decreased $12.3 million and
$22.1 million, respectively, during the second quarter and year-to-date 1999
primarily as a result of a scheduled reduction in capacity revenues under a
power supply agreement with OPC and a decrease in energy sales. Wholesale
revenues outside the service area increased by $10.0 million for the second
quarter of 1999 and decreased by $3.9 million year-to-date 1999 when compared to
the corresponding periods in 1998. The second quarter increase in wholesale
revenues outside the service area is attributed to capacity adjustments under
long-term contracts recorded during the second quarter of 1998. The year-to-date
decrease was mainly due to lower energy sales.

     Purchased power from non-affiliates. The decreases for this second quarter
and year-to-date 1999 when compared to the same periods in 1998 were mainly due
to higher demand in 1998 for energy and higher energy purchases in 1998 related
to power marketing activities, a majority of which were resold to non-affiliated
third parties. These transactions had no significant effect on net income.

     Depreciation and amortization expense. This item decreased in the second
quarter and year-to-date 1999 when compared to the corresponding periods in 1998
due mainly to higher depreciation charges recognized in 1998 under the prior
accounting order and the completion in 1998 of the amortization of deferred
Plant Vogtle costs.

     Interest income. The decreases in this item for the current quarter and
year-to-date 1999 are related to the recognition, in the corresponding periods
of 1998, of increased interest income resulting from the resolution of tax
issues between SOUTHERN and the Internal Revenue Service.

     Other, net. The changes for the second quarter and year-to-date 1999 are
attributed to reduced donations and contributions in these periods when compared
to the corresponding periods in 1998.

     Income taxes applicable to other income. The second quarter and
year-to-date 1999 decreases are attributed to taxes in 1998 on the additional
interest income discussed above.

     Other interest charges. For the current quarter and year-to-date 1999,
these charges were lower when compared to the same periods in 1998 due to the
recognition in 1998 of increased interest related to tax issues.

     Distributions on preferred securities of subsidiary companies. Second
quarter and year-to-date 1999 increases are attributed to the issuance of
additional mandatorily redeemable preferred securities in February 1999.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors including weather, regulatory matters and energy sales.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in
the Form 10-K.

                                       36
<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     Effective January 1, 1999, GEORGIA began operating under a new three-year
retail rate order. Under the order, GEORGIA's earnings are evaluated against a
retail return on common equity range of 10% to 12.5%. In compliance with the
order, retail rates were decreased by $262 million on an annual basis effective
January 1, 1999. Reference is made to Note (K) in the "Notes to the Condensed
Financial Statements" herein and Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GEORGIA in the Form 10-K for additional
information.

     In September 1998, OPC decreased its purchases of capacity under a power
supply agreement by 250 megawatts, resulting in a $16 million reduction in 1999
revenues. The resources associated with the decreased purchases in 1998 will be
used to meet the needs of GEORGIA's retail customers through 2004. As a result
of additional reduction notices given by OPC under its agreement with GEORGIA,
GEORGIA's capacity revenues received from OPC were estimated to decrease by an
additional $7 million in 1999, $18 million in 2000 and $4 million in 2001.
Effective April 1, 1999, GEORGIA and OPC entered into a new agreement which will
delay, in part, planned purchase reductions by OPC. The new agreement has been
filed with the FERC under SOUTHERN's market-based rate authority. Based on the
above, GEORGIA's capacity revenues received from OPC are now estimated to
decrease by approximately $6 million in 1999, $15 million in 2000 and $7 million
in 2001.

     Compliance costs related to the Clean Air Act and other environmental
issues could affect earnings. For additional information, see Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Issues" of GEORGIA in the
Form 10-K.

     The U.S. Environmental Protection Agency is conducting an industry-wide
investigation concerning the compliance status of certain coal-fired generating
facilities, including certain of GEORGIA's units, under the new source review
provisions of the Clean Air Act. Although the outcome of this matter cannot now
be determined, if adverse it could result in substantial penalties and
additional capital costs.

     GEORGIA's plans to achieve Year 2000 compliance have been implemented and
are included in the SOUTHERN system's Year 2000 Program. The costs related to
GEORGIA's Year 2000 program, including GEORGIA's share of costs of Southern
Nuclear Operating Company, are expected to be approximately $41 million. From
its inception through June 30, 1999, the Year 2000 program costs, recognized as
expense, amounted to $37 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
Condition - "Future Earnings Potential" herein.

     The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). GEORGIA has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.

     Reference is made to Notes (B), (C), (F), (G), and (K) through (M) in the
"Notes to the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.

                                       37
<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



FINANCIAL CONDITION

Overview

The major change in GEORGIA's financial condition during the first six months of
1999 was the addition of approximately $353.5 million to gross plant. The funds
for these additions and other capital requirements were derived primarily from
operations. See GEORGIA's Condensed Statements of Cash Flows for further
details.

Financing Activities

During the first six months of 1999, redemptions of first mortgage bonds and
preferred stock by GEORGIA totaled $209 million and $35.7 million, respectively.
In February 1999, Georgia Power Capital Trust IV, a statutory business trust
established for the purpose of holding GEORGIA's junior subordinated notes and
issuing trust preferred securities and common securities, sold $200 million of
its 6.85% trust preferred securities, which are guaranteed by GEORGIA. (See Note
(G) in the " Notes to the Condensed Financial Statements" herein and Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Financing Activities" of GEORGIA in the
Form 10-K for further details.) In March 1999, GEORGIA issued $100 million of 6
5/8% senior notes due March 31, 2039. The proceeds from this issuance were used
to repay a portion of GEORGIA's outstanding short-term indebtedness. In May
1999, GEORGIA sold, through public authorities, $53 million of 5.45% pollution
control revenue bonds due May 1, 2034; $85 million of 5.40% pollution control
revenue bonds due May 1, 2034; and $100 million of 5.25% pollution control
revenue bonds due May 1, 2034. The proceeds of these sales were used to redeem
$50 million aggregate principal amount of 6.35% pollution control revenue bonds
in June 1999; $125 million aggregate principal amount of 6.60% pollution control
revenue bonds in July 1999; and $60 million aggregate principal amount of 6 3/8%
pollution control revenue bonds in August 1999.

     GEORGIA plans to continue, to the extent possible, a program to retire
higher-cost debt and preferred stock and replace these securities with
lower-cost capital.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GEORGIA
under "Liquidity and Capital Requirements" and "Environmental Issues" in the
Form 10-K for a description of GEORGIA's capital requirements for its
construction program and environmental compliance efforts.

Sources of Capital

In addition to the financing activities previously described herein, GEORGIA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.

                                       38
<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     To meet short-term cash needs and contingencies, GEORGIA had at June 30,
1999, approximately $24.6 million of cash and cash equivalents and approximately
$1.3 billion of unused credit arrangements with banks. Of the $1.3 billion, $980
million provides liquidity support to GEORGIA's variable rate pollution control
bonds. At June 30, 1999, GEORGIA had $318.2 million and $170.3 million
outstanding in short-term notes payable to banks and commercial paper,
respectively. Management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.





                                       39
<PAGE>

                              ARTHUR ANDERSEN LLP




                                                                    Exhibit 1





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




TO GEORGIA POWER COMPANY:

     We have reviewed the accompanying condensed balance sheet of GEORGIA POWER
COMPANY (a Georgia corporation) as of June 30, 1999, and the related condensed
statements of income for the three-month and six-month periods ended June 30,
1999 and 1998 and cash flows for the six-month periods ended June 30, 1999 and
1998. These financial statements are the responsibility of the Company's
management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.

     We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1998
(not presented herein), and, in our report dated February 10, 1999, we expressed
an unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1998, is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.



/s/  Arthur Andersen LLP
Atlanta, Georgia
August 9, 1999






                                       40
<PAGE>


                               GULF POWER COMPANY



                                       41

<PAGE>
<TABLE>
<CAPTION>


                               GULF POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                         For the Three Months           For the Six Months
                                                                            Ended June 30,                Ended June 30,
                                                                      ---------------------------   ---------------------------
                                                                          1999          1998            1999          1998
                                                                      -------------  ------------   -------------  ------------

OPERATING REVENUES:
<S>                                                                       <C>           <C>             <C>           <C>
Revenues                                                                  $153,205      $160,061        $280,640      $294,614
Revenues from affiliates                                                    13,610        17,069          20,681        23,466
                                                                       -------------  ------------   -------------  ------------
Total operating revenues                                                   166,815       177,130         301,321       318,080
                                                                      -------------  ------------   -------------  ------------

OPERATING EXPENSES:
Operation--
  Fuel                                                                      53,208        55,443          91,961        96,886
  Purchased power from non-affiliates                                        9,138         8,256          13,294        12,989
  Purchased power from affiliates                                            3,100         2,545           6,675         6,433
  Other                                                                     27,780        34,169          54,922        65,450
Maintenance                                                                 15,903        14,591          32,496        27,487
Depreciation and amortization                                               16,034        16,409          32,112        31,112
Taxes other than income taxes                                               12,399        12,485          24,943        25,104
Federal and state income taxes                                               7,695         9,490          10,336        13,640
                                                                      -------------  ------------   -------------  ------------
Total operating expenses                                                   145,257       153,388         266,739       279,101
                                                                       -------------  ------------   -------------  ------------
OPERATING INCOME                                                            21,558        23,742          34,582        38,979
OTHER INCOME (EXPENSE):
Interest income                                                                260           194             501           317
Other, net                                                                     (91)         (203)           (903)       (1,406)
Income taxes applicable to other income                                       (170)          (57)             (9)          300
                                                                      -------------  ------------   -------------  ------------
INCOME BEFORE INTEREST CHARGES                                              21,557        23,676          34,171        38,190
                                                                      -------------  ------------   -------------  ------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                                   5,032         4,725           9,982         9,602
Other interest charges                                                         333         2,825             611         3,100
Interest on notes payable                                                      871           481           1,356           819
Amortization of debt discount, premium and expense, net                        491           522             989         1,100
Distributions on preferred securities of subsidiary companies                1,550         1,550           3,100         2,934
                                                                      -------------  ------------   -------------  ------------
Interest charges and other, net                                              8,277        10,103          16,038        17,555
                                                                      -------------  ------------   -------------  ------------
NET INCOME                                                                  13,280        13,573          18,133        20,635
DIVIDENDS ON PREFERRED STOCK                                                    54           209             108           418
                                                                      -------------  ------------   -------------  ------------
NET INCOME AFTER DIVIDENDS ON
 PREFERRED STOCK                                                           $13,226       $13,364         $18,025       $20,217
                                                                      =============  ============   =============  ============



              The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>

                                                              42

<PAGE>
<TABLE>
<CAPTION>
                                                   GULF POWER COMPANY
                                     CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                            (Stated in Thousands of Dollars)

                                                                                                  For the Six Months
                                                                                                    Ended June 30,
                                                                                              ----------------------------
                                                                                                 1999             1998
                                                                                              ------------     -----------

OPERATING ACTIVITIES:
<S>                                                                                              <C>             <C>
Net income                                                                                       $ 18,133        $ 20,635
Adjustments to reconcile net income to net cash provided by operating activities--
  Depreciation and amortization                                                                    34,100          35,747
  Deferred income taxes                                                                            (1,952)         (6,173)
  Other, net                                                                                        5,824          10,570
  Changes in certain current assets and liabilities--
    Receivables, net                                                                              (12,514)        (10,355)
    Inventories                                                                                   (23,700)        (10,615)
    Payables                                                                                       (4,082)         (1,610)
    Taxes accrued                                                                                  15,425          16,894
    Current costs of 1995 coal contract renegotiation                                                   -             812
    Other                                                                                          (8,716)         (5,662)
                                                                                              ------------     -----------
Net cash provided from operating activities                                                        22,518          50,243
                                                                                              ------------     -----------
INVESTING ACTIVITIES:
Gross property additions                                                                          (33,242)        (26,091)
Other                                                                                             (10,221)         (3,114)
                                                                                              ------------     -----------
Net cash used for investing activities                                                            (43,463)        (29,205)
                                                                                              ------------     -----------
FINANCING ACTIVITIES:
Proceeds--
  Preferred securities                                                                                  -          45,000
  Other long-term debt                                                                                  -          50,000
Retirements--
  Preferred stock                                                                                       -              (5)
  First mortgage bonds                                                                                  -         (15,000)
  Other long-term debt                                                                                  -          (8,327)
Notes payable, net                                                                                 53,500         (33,000)
Payment of preferred stock dividends                                                                 (117)           (419)
Payment of common stock dividends                                                                 (30,100)        (38,200)
Miscellaneous                                                                                          (4)         (4,026)
                                                                                              ------------     -----------
Net cash provided from (used for) financing activities                                             23,279          (3,977)
                                                                                              ------------     -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                             2,334          17,061
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                      969           4,707
                                                                                              ============     ===========
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                        $ 3,303        $ 21,768
                                                                                              ============     ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
  Interest (net of amount capitalized)                                                            $13,089         $12,463
  Income taxes                                                                                      2,412           5,442






            The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>

                                                           43

<PAGE>
<TABLE>
<CAPTION>
                                                  GULF POWER COMPANY
                                               CONDENSED BALANCE SHEETS
                                           (Stated in Thousands of Dollars)

                                                        ASSETS

                                                                                           At June 30,
                                                                                           1999            At December 31,
                                                                                           (Unaudited)        1998
                                                                                       ---------------------------------
UTILITY PLANT:
<S>                                                                                       <C>                <C>
Plant in service                                                                          $1,836,916         $1,809,901
Less accumulated provision for depreciation                                                  801,855            784,111
                                                                                       --------------     --------------
                                                                                           1,035,061          1,025,790
Construction work in progress                                                                 26,669             34,863
                                                                                       --------------     --------------
Total                                                                                      1,061,730          1,060,653
                                                                                       --------------     --------------

OTHER PROPERTY AND INVESTMENTS:                                                                1,586                588
                                                                                       --------------     --------------

CURRENT ASSETS:
Cash and cash equivalents                                                                      3,303                969
Receivables --
  Customer accounts receivable                                                                59,853             49,067
  Other accounts and notes receivable                                                          3,276              3,514
  Affiliated companies                                                                         5,413              3,442
  Accumulated provision for uncollectible accounts                                            (1,001)              (996)
Fossil fuel stock, at average cost                                                            47,082             24,213
Materials and supplies, at average cost                                                       28,856             28,025
Regulatory clauses under recovery                                                             12,767              9,737
Prepayments                                                                                    2,780              5,690
Vacation pay deferred                                                                          4,035              4,035
                                                                                       --------------     --------------
Total                                                                                        166,364            127,696
                                                                                       --------------     --------------


DEFERRED CHARGES:
Deferred charges related to income taxes                                                      25,286             25,308
Debt expense, being amortized                                                                 20,620             21,448
Prepaid pension costs                                                                         15,775             13,770
Miscellaneous                                                                                 19,009             18,438
                                                                                       --------------     --------------
Total                                                                                         80,690             78,964
                                                                                       --------------     --------------

TOTAL ASSETS                                                                              $1,310,370         $1,267,901
                                                                                       ==============     ==============


           The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>

                                                          44


<PAGE>
<TABLE>
<CAPTION>

                                                  GULF POWER COMPANY
                                               CONDENSED BALANCE SHEETS
                                           (Stated in Thousands of Dollars)

                                            CAPITALIZATION AND LIABILITIES

                                                                                         At June 30,
                                                                                           1999            At December 31,
                                                                                        (Unaudited)          1998
                                                                                       ---------------------------------
CAPITALIZATION:
<S>                                                                                         <C>                <C>
Common stock equity --
Common stock (without par value) --
  authorized and outstanding -- 992,717 shares                                              $ 38,060           $ 38,060
Paid-in capital                                                                              218,960            218,960
Premium on preferred stock                                                                        12                 12
Retained earnings                                                                            158,546            170,620
                                                                                       --------------     --------------
                                                                                             415,578            427,652
Preferred stock                                                                                4,236              4,236
Company obligated mandatorily redeemable preferred securities of
  subsidiary trusts holding Company Junior Subordinated Notes                                 85,000             85,000
Long-term debt                                                                               317,497            317,341
                                                                                       --------------     --------------
Total                                                                                        822,311            834,229
                                                                                       --------------     --------------

CURRENT LIABILITIES:
Long-term debt due within one year                                                            27,000             27,000
Notes payable                                                                                 85,000             31,500
Accounts payable --
  Affiliated companies                                                                        11,989             19,756
  Other                                                                                       20,032             23,697
Customer deposits                                                                             12,677             12,560
Taxes accrued                                                                                 18,551              7,432
Interest accrued                                                                               5,938              5,184
Regulatory clauses over recovery                                                               3,460              6,037
Vacation pay accrued                                                                           4,035              4,035
Dividends declared                                                                                45                 54
Miscellaneous                                                                                  1,577              3,960
                                                                                       --------------     --------------
Total                                                                                        190,304            141,215
                                                                                       --------------     --------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                            165,330            166,118
Deferred credits related to income taxes                                                      51,079             52,465
Accumulated provision for property damage                                                      4,956              1,605
Accumulated deferred investment tax credits                                                   28,672             29,632
Accumulated provision for postretirement benefits                                             25,525             23,534
Miscellaneous                                                                                 22,193             19,103
                                                                                       --------------     --------------
Total                                                                                        297,755            292,457
                                                                                       --------------     --------------

TOTAL CAPITALIZATION AND LIABILITIES                                                      $1,310,370         $1,267,901
                                                                                       ==============     ==============





           The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>

                                        45


<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                   SECOND QUARTER 1999 vs. SECOND QUARTER 1998
                                       AND
                     YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998


RESULTS OF OPERATIONS

Earnings

GULF's net income after dividends on preferred stock for the second quarter and
year-to-date 1999 was $13.2 million and $18.0 million, respectively, compared to
$13.4 million and $20.2 million for the corresponding periods of 1998. While
earnings for the current quarter remained relatively flat when compared to the
same period in 1998, earnings year-to-date declined by 10.8%, primarily due to
higher maintenance expenses incurred during the first quarter of 1999.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                           Increase (Decrease)
                                                      ---------------------------------------------------------------
                                                              Second Quarter                   Year-To-Date
                                                      ------------------------------- -------------------------------
                                                        (in thousands)        %       (in thousands)          %
<S>                                                        <C>               <C>          <C>                <C>
Revenues.........................................          $(6,856)          (4.3)        $(13,974)          (4.7)
Revenues from affiliates.........................           (3,459)         (20.3)          (2,785)         (11.9)
Fuel expense.....................................           (2,235)          (4.0)          (4,925)          (5.1)
Other operation expense..........................           (6,389)         (18.7)         (10,528)         (16.1)
Maintenance expense..............................            1,312            9.0            5,009           18.2
Other interest charges...........................           (2,492)         (88.2)          (2,489)         (80.3)
</TABLE>

     Revenues. The decreases in revenues for the second quarter and year-to-date
1999 reflect, for the most part, the recovery of lower fuel costs. The price per
ton of coal, which is GULF's primary fuel source, was lower in the second
quarter and year-to-date 1999 compared to the same periods in 1998 due to full
amortization, by March 1998, of costs related to prior year coal contract
renegotiations and the reduction of a major coal contract price. Excluding
recovery of fuel expense and certain other expenses that do not affect income,
retail revenues decreased $6.6 million for the quarter and $5.5 million
year-to-date, primarily due to a decrease in energy sales to residential
customers reflecting the impact of milder-than-normal temperatures during the
first half of 1999 as compared to hotter-than-normal temperatures recorded in
the same periods in 1998. Revenues from non-territorial wholesale energy sales
decreased $1.3 million and $4.0 million for the second quarter and year-to-date
1999, respectively, when compared to the corresponding periods of 1998. The
decreases in non-territorial wholesale energy sales were primarily due to
decreased sales through power marketing activities.

     Revenues from affiliates. Revenues from sales to affiliated companies
within the Southern electric system will vary from period to period depending on
demand and the availability and cost of generating resources at each company.
These transactions do not have a significant impact on earnings.

     Fuel expense. The decreases in fuel expense reflect lower fuel costs,
resulting from the reduction of a major coal contract price.



                                       46
<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     Other operation expense. This item decreased in this quarter when compared
to the same period in 1998 due to lower administrative and general expenses.
Year-to-date 1999, this cost decreased due to lower administrative and general
expenses as well as prior year payments related to renegotiations of coal supply
contracts being fully amortized in 1998.

     Maintenance expense. The increases in these expenses for the second quarter
and year-to-date 1999 reflect scheduled maintenance on steam plant facilities.

     Other interest charges. The decreases for the current quarter and
year-to-date 1999 are primarily attributed to the recognition, in 1998, of
interest related to tax issues.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GULF and Item 1 - BUSINESS - "Competition" in the
Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs are not fully recovered through GULF's Environmental Cost Recovery Clause.
For additional information about the Clean Air Act and other environmental
issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental
Matters" of GULF in the Form 10-K.

     The U.S. Environmental Protection Agency is conducting an industry-wide
investigation concerning the compliance status of certain coal-fired generating
facilities, including certain of GULF's units, under the new source review
provisions of the Clean Air Act. Although the outcome of this matter cannot now
be determined, if adverse it could result in substantial penalties and
additional capital costs.

     GULF's plans to achieve Year 2000 readiness have been implemented and are
included in the SOUTHERN system's Year 2000 Program. The costs related to GULF's
Year 2000 program are expected to be $5.2 million. From its inception through
June 30, 1999, the Year 2000 program costs, recognized as expense, amounted to
$4.2 million. For additional information, see SOUTHERN's MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - "Future Earnings
Potential" herein.

     In reference to the ongoing matters with the Florida PSC concerning GULF's
authorized return on equity (ROE) and the outstanding balances of certain
regulatory assets, GULF filed a revised plan on April 6, 1999. The staff of the
Florida PSC countered with another proposal on April 8, 1999. Both were
presented to the Commission at the April 20, 1999, agenda conference. The
Florida PSC approved the staff's proposal with several modifications. The
changes approved by the Florida PSC included the following: a reduction in the
authorized return mid-point from 12.0% to 11.5%, the sharing of revenues for a
period of 3 years above an earnings level of 12.5% ROE up to 14% ROE, revenue
credits to customers and the write-off of regulatory

                                       47

<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



assets totaling $7.1 million per year from 1999 through 2001. The Commission
issued an order establishing the changes associated with earnings, revenue
sharing, and other regulatory issues on May 24, 1999. On June 14, 1999, the
Coalition for Equitable Rates filed a protest requesting a formal proceeding to
review the plan proposed by the Florida PSC order. Hearings in the docket are
expected later this year or early in 2000. On July 22, 1999, the Office of
Public Counsel petitioned the Florida PSC to initiate and conduct a full revenue
requirements base rate proceeding for GULF. No action has been taken by the
Florida PSC on the Office of Public Counsel's petition. For additional
information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" and Item 1 - Business - "Regulation - State Commissions" of
GULF in the Form 10-K.

     The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). Adoption of this
statement is not expected to have a material impact on GULF's financial
statements.

     Reference is made to Notes (B) and (F) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.


FINANCIAL CONDITION

Overview

Major changes in GULF's financial condition during the first six months of 1999
included the addition of approximately $33.2 million to utility plant. The funds
for these additions and other capital requirements were derived primarily from
operations. See GULF's Condensed Statements of Cash Flows for further details.

Financing Activities

GULF plans to continue, to the extent possible, a program to retire higher-cost
debt and preferred stock and replace these securities with lower-cost capital.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GULF under
"Capital Requirements for Construction," "Environmental Matters" and "Other
Capital Requirements" in the Form 10-K for a description of GULF's capital
requirements for its construction program, environmental compliance efforts and
maturing debt.


                                       48
<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



Sources of Capital

In addition to the financing activities previously described herein, GULF plans
to obtain the funds required for construction and other purposes from sources
similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, GULF had at June 30, 1999,
approximately $3.3 million of cash and cash equivalents and $31.5 million of
unused committed lines of credit with banks in addition to $61.9 million
liquidity support for variable rate pollution control bonds. At June 30, 1999,
GULF had $85.0 million of short-term notes payable to banks. Management believes
that the need for working capital can be adequately met by utilizing lines of
credit without maintaining large cash balances.




                                       49

<PAGE>



                            MISSISSIPPI POWER COMPANY


                                       50



<PAGE>
<TABLE>
<CAPTION>
                            MISSISSIPPI POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                         For the Three Months           For the Six Months
                                                                            Ended June 30,                Ended June 30,
                                                                      ---------------------------   ---------------------------
                                                                          1999          1998            1999          1998
                                                                      -------------  ------------   -------------  ------------

OPERATING REVENUES:
<S>                                                                       <C>           <C>             <C>           <C>
Revenues                                                                  $155,333      $148,064        $276,733      $269,345
Revenues from affiliates                                                     3,257         8,548           4,292         9,423
                                                                      -------------  ------------   -------------  ------------
Total operating revenues                                                   158,590       156,612         281,025       278,768
                                                                      -------------  ------------   -------------  ------------

OPERATING EXPENSES:
Operation--
  Fuel                                                                      46,706        45,113          78,228        72,401
  Purchased power from non-affiliates                                        7,162         8,988           9,507        13,288
  Purchased power from affiliates                                            7,497         5,118          16,399        16,414
  Other                                                                     27,683        33,102          54,730        56,948
Maintenance                                                                 14,265        11,564          25,866        22,958
Depreciation and amortization                                               11,780        11,441          23,569        23,094
Taxes other than income taxes                                               12,208        11,160          23,315        23,240
Federal and state income taxes                                               9,101        10,003          13,374        14,935
                                                                      -------------  ------------   -------------  ------------
Total operating expenses                                                   136,402       136,489         244,988       243,278
                                                                       -------------  ------------   -------------  ------------
OPERATING INCOME                                                            22,188        20,123          36,037        35,490
OTHER INCOME (EXPENSE):
Interest income                                                                 69           213             150           263
Other, net                                                                     587           630           1,221           863
Income taxes applicable to other income                                       (323)          (41)           (632)         (354)
                                                                      -------------  ------------   -------------  ------------
INCOME BEFORE INTEREST CHARGES                                              22,521        20,925          36,776        36,262
                                                                      -------------  ------------   -------------  ------------
INTEREST AND OTHER CHARGES:
Interest on long-term debt                                                   5,034         5,123          10,044         9,921
Interest on notes payable                                                      874           490           1,286           918
Amortization of debt discount, premium and expense, net                        361           335             717           723
Other interest charges                                                          96            62             178           203
Distributions on preferred securities of subsidiary companies                  699           699           1,398         1,398
                                                                      -------------  ------------   -------------  ------------
Interest and other charges, net                                              7,064         6,709          13,623        13,163
                                                                      -------------  ------------   -------------  ------------
NET INCOME                                                                  15,457        14,216          23,153        23,099
DIVIDENDS ON PREFERRED STOCK                                                   504           504           1,007           999
                                                                      -------------  ------------   -------------  ------------
NET INCOME AFTER DIVIDENDS ON
 PREFERRED STOCK                                                           $14,953       $13,712         $22,146       $22,100
                                                                      =============  ============   =============  ============





           The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>

                                                              51
<PAGE>
<TABLE>
<CAPTION>
                                                MISSISSIPPI POWER COMPANY
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                            (Stated in Thousands of Dollars)

                                                                                                  For the Six Months
                                                                                                    Ended June 30,
                                                                                              ----------------------------
                                                                                                 1999             1998
                                                                                              ------------     -----------

OPERATING ACTIVITIES:
<S>                                                                                              <C>             <C>
Net income                                                                                       $ 23,153        $ 23,099
Adjustments to reconcile net income to net cash provided by operating activities--
  Depreciation and amortization                                                                    25,637          25,112
  Deferred income taxes                                                                             1,747          (1,687)
  Other, net                                                                                       (1,226)          1,891
  Changes in certain current assets and liabilities--
    Receivables, net                                                                              (15,694)         (7,444)
    Inventories                                                                                   (13,605)         (9,047)
    Payables                                                                                       (7,287)          1,682
    Taxes accrued                                                                                    (161)          3,671
    Other                                                                                          (3,329)         (2,352)
                                                                                              ------------     -----------
Net cash provided from operating activities                                                         9,235          34,925
                                                                                              ------------     -----------
INVESTING ACTIVITIES:
Gross property additions                                                                          (26,700)        (31,755)
Other                                                                                              (6,879)         (5,131)
                                                                                              ------------     -----------
Net cash used for investing activities                                                            (33,579)        (36,886)
                                                                                              ------------     -----------
FINANCING ACTIVITIES:
Proceeds--
  Pollution control bonds                                                                               -          13,520
  Other long-term debt                                                                                  -          90,000
Retirements--
  Preferred stock                                                                                       -             (87)
  First mortgage bonds                                                                                  -         (35,000)
  Pollution control bonds                                                                               -         (13,000)
  Senior Notes                                                                                        (57)              -
Notes payable, net                                                                                 56,000               -
Payment of preferred stock dividends                                                               (1,007)           (999)
Payment of common stock dividends                                                                 (27,600)        (25,500)
Miscellaneous                                                                                        (243)           (276)
                                                                                              ------------     -----------
Net cash provided from financing activities                                                        27,093          28,658
                                                                                              ------------     -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                             2,749          26,697
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                    1,327           4,432
                                                                                              ============     ===========
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                        $ 4,076        $ 31,129
                                                                                              ============     ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
  Interest (net of amount capitalized)                                                            $12,722         $11,482
  Income taxes                                                                                         97            (534)






        The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>

                                                           52
<PAGE>
<TABLE>
<CAPTION>
                                               MISSISSIPPI POWER COMPANY
                                               CONDENSED BALANCE SHEETS
                                           (Stated in Thousands of Dollars)

                                                        ASSETS

                                                                                           At June 30,
                                                                                           1999            At December 31,
                                                                                           (Unaudited)        1998
                                                                                       ---------------------------------
UTILITY PLANT:
<S>                                                                                       <C>                <C>
Plant in service, at original cost                                                        $1,571,317         $1,553,112
Less accumulated provision for depreciation                                                  604,047            583,957
                                                                                       --------------     --------------
                                                                                             967,270            969,155
Construction work in progress                                                                 58,019             51,517
                                                                                       --------------     --------------
Total                                                                                      1,025,289          1,020,672
                                                                                       --------------     --------------

OTHER PROPERTY AND INVESTMENTS:                                                                1,400                979
                                                                                       --------------     --------------

CURRENT ASSETS:
Cash and cash equivalents                                                                      4,076              1,327
Receivables --
  Customer accounts receivable                                                                40,279             29,829
  Regulatory clauses under recovery                                                            8,803              8,042
  Other accounts and notes receivable                                                         15,523             12,495
  Affiliated companies                                                                        12,409             10,946
  Accumulated provision for uncollectible accounts                                              (500)              (621)
Fossil fuel stock, at average cost                                                            28,871             16,418
Materials and supplies, at average cost                                                       19,887             18,735
Current portion of accumulated deferred income taxes                                           1,210              4,248
Prepayments                                                                                    4,301              1,651
Vacation pay deferred                                                                          4,717              4,717
                                                                                       --------------     --------------
Total                                                                                        139,576            107,787
                                                                                       --------------     --------------


DEFERRED CHARGES:
Debt expense and loss, being amortized                                                        13,167             13,713
Deferred charges related to income taxes                                                      21,313             22,697
Long-term notes receivable                                                                     1,660              2,072
Work force reduction plan                                                                      7,672             12,748
Miscellaneous                                                                                 12,139              8,937
                                                                                       --------------     --------------
Total                                                                                         55,951             60,167
                                                                                       --------------     --------------

TOTAL ASSETS                                                                              $1,222,216         $1,189,605
                                                                                       ==============     ==============



       The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>

                                                          53
<PAGE>
<TABLE>
<CAPTION>


                                               MISSISSIPPI POWER COMPANY
                                               CONDENSED BALANCE SHEETS
                                           (Stated in Thousands of Dollars)

                                            CAPITALIZATION AND LIABILITIES

                                                                                           At June 30,
                                                                                           1999            At December 31,
                                                                                           (Unaudited)        1998
                                                                                       ---------------------------------
CAPITALIZATION:
<S>                                                                                         <C>                <C>
Common stock equity --
Common stock (without par value) --
  authorized 1,130,000 shares; outstanding 1,121,000 shares                                 $ 37,691           $ 37,691
Paid-in capital                                                                              179,474            179,474
Premium on preferred stock                                                                       326                326
Retained earnings                                                                            168,286            173,740
                                                                                       --------------     --------------
                                                                                             385,777            391,231
Preferred stock                                                                               31,809             31,809
Company obligated mandatorily redeemable preferred securities of
  subsidiary trust holding Company Junior Subordinated Notes                                  35,000             35,000
Long-term debt                                                                               292,744            292,744
                                                                                       --------------     --------------
Total                                                                                        745,330            750,784
                                                                                       --------------     --------------

CURRENT LIABILITIES:
Long-term debt due within one year                                                            50,020             50,020
Notes payable                                                                                 69,000             13,000
Accounts payable --
  Affiliated companies                                                                        11,120              8,788
  Regulatory clauses over recovery                                                                 -              4,412
  Other                                                                                       36,818             47,113
Customer deposits                                                                              3,477              3,272
Taxes accrued--
  Federal and state income                                                                    11,518              1,124
  Other                                                                                       20,824             31,379
Interest accrued                                                                               3,133              2,955
Miscellaneous                                                                                 10,494             11,753
                                                                                       --------------     --------------
Total                                                                                        216,404            173,816
                                                                                       --------------     --------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                            143,406            143,852
Accumulated deferred investment tax credits                                                   25,301             25,913
Deferred credits related to income taxes                                                      35,619             37,277
Postretirement benefits other than pension                                                    26,255             25,869
Accumulated provision for property damage                                                        334                910
Work force reduction plan                                                                     12,067             13,051
Miscellaneous                                                                                 17,500             18,133
                                                                                       --------------     --------------
Total                                                                                        260,482            265,005
                                                                                       --------------     --------------

TOTAL CAPITALIZATION AND LIABILITIES                                                      $1,222,216         $1,189,605
                                                                                       ==============     ==============




       The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>

                                        54

<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                   SECOND QUARTER 1999 vs. SECOND QUARTER 1998
                                       AND
                     YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998


RESULTS OF OPERATIONS

Earnings

MISSISSIPPI's net income after dividends on preferred stock for the second
quarter and year-to-date 1999 was $14.9 million and $22.1 million, respectively,
compared to $13.7 million and $22.1 million for the corresponding periods of
1998. Earnings for the current quarter increased $1.2 million or 9.1% due
primarily to an increase in operating revenues.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                           Increase (Decrease)
                                                      ---------------------------------------------------------------
                                                              Second Quarter                   Year-To-Date
                                                      ------------------------------- -------------------------------
                                                        (in thousands)        %       (in thousands)          %
<S>                                                         <C>               <C>           <C>               <C>
Revenues.........................................           $7,269            4.9           $7,388            2.7
Revenues from affiliates.........................           (5,291)         (61.9)          (5,131)         (54.5)
Purchased power from non-affiliates..............           (1,826)         (20.3)          (3,781)         (28.5)
Purchased power from affiliates..................            2,379           46.5              (15)          (0.1)
Other operation expense..........................           (5,419)         (16.4)          (2,218)          (3.9)
Maintenance expense..............................            2,701           23.4            2,908           12.7
</TABLE>


     Revenues. Revenue increases for the second quarter and year-to-date 1999
result primarily from increased energy sales to territorial wholesale customers
and year-to-date, to a lesser extent, from increased retail energy sales. These
revenue increases were partially offset by decreases in non-territorial
wholesale energy sales for the quarter and year-to-date of 21.8% and 40.7%,
respectively. Territorial wholesale energy sales were up 11.6% for the quarter
and 11.4% year-to-date due to strong growth in the wholesale service areas. In
addition, for the quarter, retail energy sales to industrial customers were up
3.9%, while energy sales to residential and commercial customers were down by
6.9% and 0.2%. Year-to-date, retail energy sales to commercial and industrial
customers were up 4.3% and 2.2%, respectively, while energy sales to residential
customers were down 6.1%. Industrial energy sales were positively impacted by
increased production by several larger industrial customers, while commercial
energy sales were positively impacted by increased tourism and strong growth in
this sector. Residential energy sales were lower due to milder temperatures
during the current quarter and year-to-date when compared same periods in 1998.
Retail revenues, excluding those revenues which represent the recovery of fuel
expense and certain other expenses and do not affect income, increased $1.3
million for the current quarter and $0.6 million year-to-date. Wholesale
territorial revenues, excluding fuel revenues which do not affect income,
increased $2.6 million for the current quarter and $5.7 million year-to-date.



                                       55
<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     Revenues from affiliates and Purchased power from affiliates. Revenues from
sales to affiliated companies within the Southern electric system, as well as
purchases of energy, will vary from period to period depending on demand and the
availability and cost of generating resources at each company. These
transactions do not have a significant impact on earnings.

     Purchased power from non-affiliates. This item decreased for the quarter
and year-to-date 1999 when compared to the corresponding periods in 1998
reflecting the decrease in the demand for energy.

     Other operation expense. These costs decreased for the current quarter and
year-to-date due primarily to a decrease in administrative and general expenses.
Administrative and general expenses were down due to higher amortization of the
work force reduction plan in 1998.

     Maintenance expense. These expenses were up for the quarter and
year-to-date due to increased maintenance on distribution lines.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment. Operating revenues will be affected by any changes in
rates under the PEP and ECO plans. The PEP has proven to be a stabilizing force
on electric rates, with only moderate changes in rates taking place.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of
MISSISSIPPI in the Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be recovered. MISSISSIPPI's 1999 ECO Plan filing was approved, as
filed, by the Mississippi PSC on March 18, 1999 and resulted in a slight
increase in customer prices. For additional information about the Clean Air Act
and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Environmental Matters" of MISSISSIPPI in the Form 10-K.

     The U.S. Environmental Protection Agency is conducting an industry-wide
investigation concerning the compliance status of certain coal-fired generating
facilities, including certain of MISSISSIPPI's units, under the new source
review provisions of the Clean Air Act. Although the outcome of this matter
cannot now be determined, if adverse it could result in substantial penalties
and additional capital costs.

     MISSISSIPPI's plans to achieve Year 2000 readiness have been implemented
and are included in the SOUTHERN system's Year 2000 Program. The costs related
to MISSISSIPPI's Year 2000 program are expected to be $4.9 million. From its
inception through June 30, 1999, the Year 2000 program costs, recognized as
expense, amounted to $4.6 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - "Future Earnings Potential" herein.


                                       56
<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     The FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which was to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities Deferral
of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement
No. 133, which delayed adoption until the year 2001. MISSISSIPPI has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.

     Reference is made to Notes (B) and (F) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.


FINANCIAL CONDITION

Overview

Major changes in MISSISSIPPI's financial condition during the first six months
of 1999 included the addition of approximately $26.7 million to utility plant.
The funds for these additions and other capital requirements were derived
primarily from operations. See MISSISSIPPI's Condensed Statements of Cash Flows
for further details.

Financing Activities

MISSISSIPPI plans to continue, to the extent possible, a program to retire
higher-cost debt and replace these securities with lower-cost capital.

Capital Requirements

In April 1999, MISSISSIPPI and Escatawpa Funding, Limited Partnership
("Escatawpa"), entered into a lease agreement whereby MISSISSIPPI will design
and construct, as agent for Escatawpa, a 1,064 megawatt natural gas combined
cycle facility. It is expected that the project will cost approximately $406
million, and upon completion of the facility, MISSISSIPPI will lease the
facility from Escatawpa for an initial term of approximately 10 years. For
additional information, reference is made to Item 7 - MANAGEMENT'S DISCUSSION
AND ANALYSIS - "Capital Requirements for Construction" of MISSISSIPPI and Notes
3 and 4 to the financial statements of MISSISSIPPI in Item 8 of the Form 10-K.

     Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of
MISSISSIPPI under "Capital Requirements for Construction," "Environmental
Matters" and "Other Capital Requirements" in the Form 10-K for a description of
MISSISSIPPI's capital requirements for its construction program, environmental
compliance efforts, sinking fund requirements and maturities of long-term debt.



                                       57

<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION




Sources of Capital

In addition to the financing activities previously described herein, MISSISSIPPI
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, MISSISSIPPI had at June
30, 1999, approximately $4.1 million of cash and cash equivalents and
approximately $76.3 million of unused committed credit arrangements with banks
(including $10.8 million of such arrangements under which borrowings may be made
only to fund purchase obligations relating to variable rate pollution control
bonds). At June 30, 1999, MISSISSIPPI had short-term notes payable outstanding
of $69.0 million. Management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.

                                       58
<PAGE>


                                SAVANNAH ELECTRIC
                                       AND
                                  POWER COMPANY






                                       59
<PAGE>
<TABLE>
<CAPTION>
                       SAVANNAH ELECTRIC AND POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                         For the Three Months           For the Six Months
                                                                            Ended June 30,                Ended June 30,
                                                                      ---------------------------   ---------------------------
                                                                          1999          1998            1999          1998
                                                                      -------------  ------------   -------------  ------------

OPERATING REVENUES:
<S>                                                                       <C>           <C>             <C>           <C>
Revenues                                                                  $ 61,114      $ 68,482        $107,846      $116,691
Revenues from Affiliates                                                       578         1,134             944         1,306
                                                                      -------------  ------------   -------------  ------------
Total operating revenues                                                    61,692        69,616         108,790       117,997
                                                                      -------------  ------------   -------------  ------------

OPERATING EXPENSES:
Operation--
  Fuel                                                                      10,951        15,446          17,544        21,254
  Purchased power from non-affiliates                                        2,361         2,723           3,453         3,936
  Purchased power from affiliates                                           10,276         9,216          19,453        19,380
  Other                                                                     11,961        11,692          23,240        22,837
Maintenance                                                                  4,759         4,884           9,198         8,562
Depreciation and amortization                                                5,966         5,258          11,943        10,516
Taxes other than income taxes                                                2,923         3,128           5,827         5,966
Federal and state income taxes                                               3,383         5,663           4,103         7,726
                                                                      -------------  ------------   -------------  ------------
Total operating expenses                                                    52,580        58,010          94,761       100,177
                                                                      -------------  ------------   -------------  ------------
OPERATING INCOME                                                             9,112        11,606          14,029        17,820
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                             (8)           24              13            45
Interest income                                                                 27            67              63           135
Other, net                                                                    (488)         (441)           (932)         (870)
Income taxes applicable to other income                                        178           145             336           278
                                                                      -------------  ------------   -------------  ------------
INCOME BEFORE INTEREST CHARGES                                               8,821        11,401          13,509        17,408
                                                                      -------------  ------------   -------------  ------------
INTEREST AND OTHER CHARGES:
Interest on long-term debt                                                   2,463         2,608           4,938         5,318
Allowance for debt funds used during construction                             (101)          (22)           (127)          (48)
Interest on notes payable                                                      177           112             198           138
Amortization of debt discount, premium and expense, net                        235           220             468           407
Distributions on preferred securities of subsidiary trust                      685             -           1,370             -
Other interest charges                                                          94            95             185           198
                                                                      -------------  ------------   -------------  ------------
Interest and other charges, net                                              3,553         3,013           7,032         6,013
                                                                      -------------  ------------   -------------  ------------
NET INCOME                                                                   5,268         8,388           6,477        11,395
DIVIDENDS ON PREFERRED STOCK                                                     -           581               -         1,162
                                                                      -------------  ------------   -------------  ------------
NET INCOME AFTER DIVIDENDS ON
 PREFERRED STOCK                                                           $ 5,268       $ 7,807         $ 6,477       $10,233
                                                                      =============  ============   =============  ============



            The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>

                                                              60

<PAGE>
<TABLE>
<CAPTION>
                                           SAVANNAH ELECTRIC AND POWER COMPANY
                                      CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                             (Stated in Thousands of Dollars)

                                                                                                   For the Six Months
                                                                                                     Ended June 30,
                                                                                              -----------------------------
                                                                                                 1999             1998
                                                                                              ------------     ------------

OPERATING ACTIVITIES:
<S>                                                                                               <C>             <C>
Net income                                                                                        $ 6,477         $ 11,395
Adjustments to reconcile net income to net cash provided by operating activities--
  Depreciation and amortization                                                                    12,757           11,348
  Deferred income taxes and investment tax credits, net                                              (775)           3,171
  Allowance for equity funds used during construction                                                 (13)             (45)
  Other, net                                                                                          559             (866)
  Changes in certain current assets and liabilities--
    Receivables, net                                                                              (12,533)         (17,467)
    Inventories                                                                                    (2,173)             505
    Payables                                                                                        4,177           10,238
    Taxes accrued                                                                                    (362)            (950)
    Other                                                                                           1,032           (1,956)
                                                                                              ------------     ------------
Net cash provided from operating activities                                                         9,146           15,373
                                                                                              ------------     ------------
INVESTING ACTIVITIES:
Gross property additions                                                                          (17,019)          (8,126)
Other                                                                                              (1,926)            (832)
                                                                                              ------------     ------------
Net cash used for investing activities                                                            (18,945)          (8,958)
                                                                                              ------------     ------------
FINANCING ACTIVITIES:
Proceeds--
  Other long-term debt                                                                                  -           50,000
Retirements--
  First mortgage bonds                                                                            (15,800)         (30,000)
  Other long-term debt                                                                               (254)         (20,340)
Notes payable, net                                                                                 35,400           10,000
Payment of preferred stock dividends                                                                    -           (1,162)
Payment of common stock dividends                                                                 (12,400)         (11,600)
Miscellaneous                                                                                         319           (2,232)
                                                                                              ------------     ------------
Net cash provided from (used for) financing activities                                              7,265           (5,334)
                                                                                              ------------     ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                            (2,534)           1,081
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                    5,962            6,144
                                                                                              ============     ============
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                        $ 3,428          $ 7,225
                                                                                              ============     ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
  Interest (net of amount capitalized)                                                             $6,670           $6,718
  Income taxes                                                                                        224            1,786



          The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>

                                                            61
<PAGE>
<TABLE>
<CAPTION>

                                        SAVANNAH ELECTRIC AND POWER COMPANY
                                              CONDENSED BALANCE SHEETS
                                          (Stated in Thousands of Dollars)

                                                       ASSETS

                                                                                          At June 30,
                                                                                          1999           At December 31,
                                                                                          (Unaudited)       1998
                                                                                       ------------------------------
UTILITY PLANT:
<S>                                                                                       <C>               <C>
Plant in service, at original cost                                                        $794,676          $781,964
Less accumulated provision for depreciation                                                352,435           341,930
                                                                                       ------------     -------------
                                                                                           442,241           440,034
Construction work in progress                                                                6,488             2,908
                                                                                       ------------     -------------
Total                                                                                      448,729           442,942
                                                                                       ------------     -------------

OTHER PROPERTY AND INVESTMENTS:                                                              1,420             1,420
                                                                                       ------------     -------------

CURRENT ASSETS:
Cash and cash equivalents                                                                    3,428             5,962
Receivables --
  Customer accounts receivable                                                              24,501            18,030
  Other accounts and notes receivable                                                        3,748             3,543
  Affiliated companies                                                                       8,089             1,388
  Accumulated provision for uncollectible accounts                                            (239)             (284)
Fuel cost under recovery                                                                    16,739            17,628
Fossil fuel stock, at average cost                                                           6,902             4,984
Materials and supplies, at average cost                                                      6,751             6,496
Prepayments                                                                                  1,207             4,772
                                                                                       ------------     -------------
Total                                                                                       71,126            62,519
                                                                                       ------------     -------------


DEFERRED CHARGES:
Deferred charges related to income taxes                                                    16,751            17,130
Debt issue expense, being amortized                                                          3,162             3,554
Premium on reacquired debt, being amortized                                                  8,791             8,570
Prepaid pension costs                                                                        2,410             3,281
Cash surrender value of life insurance for deferred compensation plans                      14,179            14,179
Miscellaneous                                                                                3,966             2,204
                                                                                       ------------     -------------
Total                                                                                       49,259            48,918
                                                                                       ------------     -------------

TOTAL ASSETS                                                                              $570,534          $555,799
                                                                                       ============     =============





       The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>

                                                         62

<PAGE>
<TABLE>
<CAPTION>



                                      SAVANNAH ELECTRIC AND POWER COMPANY
                                              CONDENSED BALANCE SHEETS
                                          (Stated in Thousands of Dollars)

                                           CAPITALIZATION AND LIABILITIES

                                                                                          At June 30,
                                                                                          1999           At December 31,
                                                                                          (Unaudited)       1998
                                                                                       ------------------------------
CAPITALIZATION:
<S>                                                                                       <C>                <C>
Common stock equity --
Common stock (par value value $5 per share) --
  authorized 16,000,000 shares; outstanding 10,844,635 shares                              $54,223           $54,223
Paid-in capital                                                                              8,688             8,688
Retained earnings                                                                          107,031           112,954
                                                                                       ------------     -------------
                                                                                           169,942           175,865
Company obligated mandatorily redeemable preferred securities of
  subsidiary trust holding Company Junior Subordinated Notes                                40,000            40,000
Long-term debt                                                                             147,410           163,443
                                                                                       ------------     -------------
Total                                                                                      357,352           379,308
                                                                                       ------------     -------------

CURRENT LIABILITIES:
Long-term debt due within one year                                                             668               689
Notes payable                                                                               35,400                 -
Accounts payable --
  Affiliated companies                                                                       4,860             5,014
  Other                                                                                     13,614            10,833
Customer deposits                                                                            5,461             5,224
Taxes accrued--
  Federal and state income                                                                   1,502             2,467
  Other                                                                                      2,071             2,891
Interest accrued                                                                             3,725             3,815
Vacation pay accrued                                                                         2,038             1,978
Miscellaneous                                                                                3,960             6,700
                                                                                       ------------     -------------
Total                                                                                       73,299            39,611
                                                                                       ------------     -------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                           83,621            82,778
Accumulated deferred investment tax credits                                                 11,611            11,943
Deferred credits related to income taxes                                                    20,775            21,349
Deferred compensation plans                                                                 10,042             9,788
Postretirement benefits                                                                      7,214             6,434
Miscellaneous                                                                                6,620             4,588
                                                                                       ------------     -------------
Total                                                                                      139,883           136,880
                                                                                       ------------     -------------

TOTAL CAPITALIZATION AND LIABILITIES                                                      $570,534          $555,799
                                                                                       ============     =============



       The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>

                                        63



<PAGE>


                       SAVANNAH ELECTRIC AND POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                   SECOND QUARTER 1999 vs. SECOND QUARTER 1998
                                       AND
                     YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998


RESULTS OF OPERATIONS

Earnings

SAVANNAH's net income after dividends on preferred stock for the second quarter
and year-to-date 1999 was $5.3 million and $6.5 million, respectively, as
compared to $7.8 million and $10.2 million for the corresponding periods of
1998. Earnings decreased due to lower operating revenues primarily reflecting
the Georgia PSC's accounting order and, to a lesser extent, mild weather. For
additional information, see Note (N) in the "Notes to the Condensed Financial
Statements" herein for details regarding the accounting order.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                           Increase (Decrease)
                                                      ---------------------------------------------------------------
                                                              Second Quarter                   Year-To-Date
                                                      ------------------------------- -------------------------------
                                                        (in thousands)        %       (in thousands)          %
<S>                                                        <C>              <C>            <C>               <C>
Revenues.........................................          $(7,368)         (10.8)         $(8,845)          (7.6)
Fuel expense.....................................           (4,495)         (29.1)          (3,710)         (17.5)
Depreciation and amortization....................              708           13.5            1,427           13.6
Maintenance expense..............................             (125)          (2.6)             636            7.4
</TABLE>


     Revenues. Revenues for the quarter and year-to-date 1999 fell primarily due
to lower total energy sales, particularly to the retail sector, and tariff
reductions implemented as a part of the Georgia PSC accounting order. Retail
energy sales to residential, commercial and industrial customers for the quarter
were down 8.3%, 1.8% and 9.2%, respectively. Year-to-date, retail energy sales
to these same customers were down 3.2%, 0.5% and 20.6%, respectively.
Residential and commercial energy sales were affected by the mild temperatures
while industrial energy sales were affected by reduced demand from one
industrial customer and the shut-down of another industrial customer's
facilities. In the second quarter and year-to-date 1999, the impacts on
SAVANNAH's revenues from this shut-down were $0.2 million and $0.4 million,
respectively. For additional information, see "Future Earnings Potential"
herein.

     Fuel expenses. The decreases in these costs from the corresponding periods
in 1998 are attributed to lower demand for energy and lower coal prices.

     Depreciation and amortization expense. This item increased during the
current quarter and year-to-date 1999 when compared to the corresponding periods
in 1998 due primarily to additional depreciation charges pursuant to the Georgia
PSC accounting order.

     Maintenance expense. The year-to-date increase is primarily attributed to
increased distribution line clearance expenses and a turbine dismantle
inspection of SAVANNAH's largest coal unit.

                                       64

<PAGE>


                       SAVANNAH ELECTRIC AND POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment.

     In June 1998, the Georgia PSC approved a four-year accounting order for
SAVANNAH. Reference is made to Note (N) in the "Notes to the Condensed Financial
Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" of SAVANNAH in the Form 10-K for additional information.

     In mid-1998, one of SAVANNAH's largest industrial customers added an
additional steam turbine unit. The impact of this on SAVANNAH's revenues had
been planned for, and the customer is under contract for a minimum of 5
megawatts per year. In October 1998, another of SAVANNAH's largest customers
closed its Savannah operations. Base revenues from this customer had averaged $2
million annually. Under the terms of its contract with SAVANNAH, this customer
is obligated to pay $1 million annually through 2001.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH
in the Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of SAVANNAH in the Form 10-K.

     The U.S. Environmental Protection Agency is conducting an industry-wide
investigation concerning the compliance status of certain coal-fired generating
facilities, including certain of SAVANNAH's units, under the new source review
provisions of the Clean Air Act. Although the outcome of this matter cannot now
be determined, if adverse it could result in substantial penalties and
additional capital costs.

     SAVANNAH's plans to achieve Year 2000 readiness have been implemented and
are included in the SOUTHERN system's Year 2000 Program. The costs related to
SAVANNAH's Year 2000 program are expected to be $1.2 million. From its inception
through June 30, 1999, the Year 2000 program costs, recognized as expense,
amounted to $1.0 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - "Future Earnings Potential" herein.

     The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). SAVANNAH has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.

                                       65


<PAGE>


                       SAVANNAH ELECTRIC AND POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     Reference is made to Notes (B) and (N) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.


FINANCIAL CONDITION

Overview

Major changes in SAVANNAH's financial condition during the first six months of
1999 included the addition of approximately $17 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operations and credit arrangements with banks. See SAVANNAH's Condensed
Statements of Cash Flows for further details.

Financing Activities

In June 1999, SAVANNAH purchased on the open market all $15 million outstanding
of its 7 7/8% Series First Mortgage Bonds due May 1, 2025. This purchase was
financed with short-term debt. SAVANNAH plans to continue, to the extent
possible, a program to retire higher-cost debt and replace these obligations
with lower-cost capital.

Sources of Capital

SAVANNAH plans to obtain the funds required for construction and other purposes
from sources similar to those used in the past. The amount, type and timing of
any financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS "Financing Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, SAVANNAH had at June 30,
1999, approximately $3.4 million of cash and cash equivalents and approximately
$25.1 million of unused credit arrangements with banks. At June 30, 1999,
SAVANNAH had $35.4 million outstanding of notes payable to banks. Since SAVANNAH
has no major generating plants under construction, management believes that the
need for working capital can be adequately met by utilizing lines of credit.









                                       66






<PAGE>








                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                       FOR
                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                              ALABAMA POWER COMPANY
                              GEORGIA POWER COMPANY
                               GULF POWER COMPANY
                            MISSISSIPPI POWER COMPANY
                       SAVANNAH ELECTRIC AND POWER COMPANY


                          INDEX TO APPLICABLE NOTES TO
                       FINANCIAL STATEMENTS BY REGISTRANT


         Registrant                 Applicable Notes

         SOUTHERN                   A, B, C, D, E, F, H, I, J, K, L, M, O, P

         ALABAMA                    A, B, C, F, G, H, I, J

         GEORGIA                    A, B, C, F, G, K, L, M

         GULF                       A, B, F

         MISSISSIPPI                A, B, F

         SAVANNAH                   A, B, N










                                       67
<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                              ALABAMA POWER COMPANY
                              GEORGIA POWER COMPANY
                               GULF POWER COMPANY
                            MISSISSIPPI POWER COMPANY
                       SAVANNAH ELECTRIC AND POWER COMPANY


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:

(A)  The condensed financial  statements of the registrants included herein have
     been prepared by each registrant,  without audit, pursuant to the rules and
     regulations of the SEC. In the opinion of each registrant's management, the
     information   regarding  such  registrant  furnished  herein  reflects  all
     adjustments  necessary to present  fairly the results for the periods ended
     June 30,  1999 and  1998.  Certain  information  and  footnote  disclosures
     normally  included in  financial  statements  prepared in  accordance  with
     generally  accepted  accounting  principles  have been condensed or omitted
     pursuant to such rules and regulations,  although each registrant  believes
     that the  disclosures  regarding  such  registrant are adequate to make the
     information presented not misleading.  It is suggested that these condensed
     financial  statements of each  registrant be read in  conjunction  with the
     financial  statements of such registrant and the notes thereto  included in
     the Form 10-K.  Certain  prior  period  amounts have been  reclassified  to
     conform with current period presentation.

         The condensed financial statements of ALABAMA and GEORGIA included
      herein have been reviewed by ALABAMA's and GEORGIA's independent public
      accountants as set forth in their reports included herein as Exhibit 1 to
      ALABAMA's and GEORGIA's condensed financial statements.

(B)   SOUTHERN's operating affiliates are subject to the provisions of FASB
      Statement No. 71, Accounting for the Effects of Certain Types of
      Regulation. In the event that a portion of a company's operations is no
      longer subject to these provisions, the company would be required to write
      off related unrecoverable regulatory assets and liabilities, and determine
      if any other assets have been impaired. For additional information, see
      Note 1 to the financial statements of each registrant in Item 8 of the
      Form 10-K.

(C)  The  staff of the SEC has  questioned  certain  of the  current  accounting
     practices of the electric utility industry--including SOUTHERN's--regarding
     the recognition,  measurement and classification of  decommissioning  costs
     for nuclear generating facilities in the financial statements.  In response
     to these  questions,  the FASB has  decided  to review the  accounting  for
     obligations  related to the  retirement  of  long-lived  assets,  including
     nuclear  decommissioning.  Reference is made to MANAGEMENT'S DISCUSSION AND
     ANALYSIS - "Future Earnings Potential" of SOUTHERN,  ALABAMA and GEORGIA in
     Item 7 and Note 1 to the  financial  statements  of  SOUTHERN,  ALABAMA and
     GEORGIA under  "Depreciation and Nuclear  Decommissioning" in Item 8 of the
     Form 10-K.

(D)   SOUTHERN engages in price risk management activities. Reference is made to
      MANAGEMENT'S DISCUSSION AND ANALYSIS - "Derivative Financial Instruments"
      and Note 1 to the financial statements of SOUTHERN in Item 8 of the Form
      10-K for a discussion of these activities. Activities for non-trading
      purposes consist of transactions that are employed to mitigate SOUTHERN's
      risk related to interest rate and foreign currency exchange rate
      fluctuations. At June 30, 1999, the status of outstanding non-trading
      related derivative contracts was as follows:


                                       68
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)

<TABLE>
<CAPTION>

                                                  Year of
                                                Maturity or            Notional              Unrealized
                     Type                      Termination              Amount              Gain (Loss)
                                                                                (in thousands)
      <S>                                          <C>           <C>                        <C>
      Interest rate swaps                          2002-2016           $773,523             $(23,882)
                                                   2001-2012     (pound)600,000             $(82,904)
                                                   2002-2007          DM691,000             $(19,449)

      Cross currency swaps                         2001-2007     (pound)413,800             $20,765
      Cross currency swaption                           2003          DM510,000             $6,456
         (pound) - Denotes British pounds sterling.
         DM - Denotes Deutschemark.
</TABLE>

      In January 1998, Southern Energy and Vastar Resources, Inc. combined their
      energy trading and marketing activities to form a joint venture. Southern
      Energy's investment in the joint venture is accounted for under the equity
      method of accounting. SOUTHERN and Vastar have made guarantees to certain
      counterparties regarding performance of contractual commitments by the
      joint venture. At June 30, 1999, outstanding guarantees related to the
      estimated fair value of net contractual commitments were approximately
      $115 million. Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS -
      "Future Earnings Potential" of SOUTHERN in Item 7 and Notes 1 and 5 to the
      financial statements of SOUTHERN under the captions "Financial Instruments
      for Trading Activities" and "Energy Trading and Marketing Commitments",
      respectively, in Item 8 of the Form 10-K.

(E)   SOUTHERN's principal business segment -- or its traditional business -- is
      the five regulated electric utility operating companies that provide
      electric service in four southeastern states. The other reportable
      business segment is non-traditional energy services provided by Southern
      Energy, which develops and manages electricity and other energy-related
      projects both in the United States and abroad. Intersegment revenues are
      not material. Financial data for business segments for the periods covered
      in the Form 10-Q are as follows:

<TABLE>
<CAPTION>


                                              Regulated
                                              Domestic             Southern Energy          All
                                              Electric        Non-Traditional Services      Other     Reconciling
                                              Utilities  International  Domestic  Total     (Note)    Eliminations  Consolidated

                                              ------------ -------------------------------- --------- ------------- ---------------
    Three Months Ended June 30, 1999:                                       (in millions)
    <S>                                        <C>          <C>        <C>        <C>         <C>        <C>            <C>
      Operating revenues                       $ 2,243      $  378     $ 125      $  503      $ 55       $   (10)       $  2,791
      Segment net income (loss)                    264          58        19          77       (11)          (16)            314
    Six Months Ended June 30, 1999:
      Operating revenues                         4,125         840       185       1,025        97           (14)          5,233
      Segment net income (loss)                    432         146        19         165       (44)          (15)            538
    Total assets at June 30, 1999               25,077       9,236     4,045      13,281     1,466        (2,254)         37,570
    ----------------------------------------- ------------ ---------- ---------- ---------- --------- ------------- ---------------

    Three Months Ended June 30, 1998:
      Operating revenues                        $ 2,431     $  411      $  33    $  444      $  42       $   (4)         $ 2,913
      Segment net income (loss)                     267         34          1        35        (30)          (2)             270
    Six Months Ended June 30, 1998:
      Operating revenues                          4,385        886         67       953         77           (7)           5,408
      Segment net income (loss)                     456         91          7        98        (37)          (5)             512
    Total assets at December 31, 1998            24,421      9,578      2,869    12,447      1,438       (2,114)          36,192
    ------------------------------------------ ----------- ----------- -------- ---------- --------- -------------- ---------------
</TABLE>

                                       69

<PAGE>



NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)


      (Note) The all other category includes parent SOUTHERN, which does not
      allocate operating expenses to business segments. Also, this category
      includes segments below the quantitative threshold for separate
      disclosure. These segments include a wireless communication company and a
      developmental company for energy products and services.
      Non-traditional services exclude interest expense to parent SOUTHERN.

(F)   Reference is made to Notes 3 and 7 to each of the registrant's financial
      statements, except SAVANNAH'S, in Item 8 of the Form 10-K for a discussion
      of the FERC orders in proceedings regarding the reasonableness of the
      return on common equity on certain of the Southern electric system's
      wholesale rate schedules and contracts and a discussion of the long-term
      power sales agreements. A settlement agreement relating to the proceedings
      pending at the FERC which provides for an equity return of 11% under the
      formula rates has been filed with the FERC for its approval. If approved,
      these rates will be effective as of January 5, 1999 for three unit power
      sales contracts, and as of July 1, 1999 for the other contracts.

(G)   During the first six months of 1999, statutory business trusts, formed by
      ALABAMA and GEORGIA of which such companies own all the common securities,
      issued mandatorily redeemable preferred securities as follows: (in
      thousands)
<TABLE>
<CAPTION>

                                                                                 Maturity Date
         Company       Date of Issue       Amount        Rate        Notes          of Notes

         <S>                <C>           <C>         <C>             <C>            <C>
         ALABAMA            2/25/99         $50,000   Auction         $51,550        2/28/2029
         GEORGIA            2/25/99        $200,000      6.85%       $206,186        3/31/2029
</TABLE>

      Substantially all the assets of each trust are junior subordinated notes
      issued by the related company in the respective approximate principal
      amounts set forth above. ALABAMA and GEORGIA consider that the mechanisms
      and obligations relating to the preferred securities issued for its
      benefit, taken together, constitute a full and unconditional guarantee by
      it of the respective trusts' payment obligations with respect to the
      preferred securities.

(H)   Reference is made to Note 3 to the financial statements of SOUTHERN and
      ALABAMA in Item 8 of the Form 10-K for information relating to retail rate
      adjustment procedures.

(I)   Reference is made to Note 3 to the financial statements of SOUTHERN and
      ALABAMA in Item 8 of the Form 10-K and to Note (I) to each registrant's
      quarterly report on Form 10-Q for the quarter ended March 31, 1999, for
      information relating to a judgment against ALABAMA arising from discharges
      into Lake Martin.

(J)   Reference is made to Note 3 to the financial statements of SOUTHERN and
      ALABAMA in Item 8 of the Form 10-K for information relating to a class
      action charging ALABAMA with fraud and non-compliance with regulatory
      statutes relating to the offer, sale and financing of "extended service
      contracts" in connection with the sale of electric appliances. The class
      of plaintiffs has been decertified on the joint motion of the plaintiffs
      and ALABAMA, and it is expected that this action will be settled in the
      near future for an immaterial amount.


                                       70


<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)



(K)  Reference  is made to Note 3 to the  financial  statements  of SOUTHERN and
     GEORGIA in Item 8 of the Form 10-K for information  concerning a three-year
     rate order approved by the Georgia PSC effective January 1, 1999. The order
     decreased annual retail rates by $262 million effective January 1, 1999 and
     by an additional $24 million  effective  January 1, 2000. The order further
     provides for $85 million each year, plus up to $50 million  annually of any
     earnings in excess of a 12.5%  retail  return on common  equity  during the
     second  and third  years,  to be  applied to  accelerated  amortization  or
     depreciation of assets.  Two-thirds of any additional earnings in excess of
     the 12.5%  return  will be applied  to rate  reductions  and the  remaining
     one-third retained by GEORGIA.

(L)   Reference is made to Note 3 to the financial statements of SOUTHERN and
      GEORGIA in Item 8 of the Form 10-K for information regarding GEORGIA's
      designation as a potentially responsible party under the Comprehensive
      Environmental Response, Compensation and Liability Act and other
      environmental contingencies.

(M)  In September  1998,  OPC decreased its purchases of capacity  under a power
     supply agreement by 250 megawatts,  resulting in a $16 million reduction in
     1999 revenues.  The resources  associated  with the decreased  purchases in
     1998 will be used to meet the needs of GEORGIA's retail  customers  through
     2004.  As a result of additional  reduction  notices given by OPC under its
     agreement with GEORGIA,  GEORGIA's capacity revenues received from OPC were
     estimated to decrease by an additional  $7 million in 1999,  $18 million in
     2000 and $4  million in 2001.  Effective  April 1,  1999,  GEORGIA  and OPC
     entered into a new agreement  which will delay, in part,  planned  purchase
     reductions  by OPC.  The new  agreement  has been filed with the FERC under
     SOUTHERN's  market-based  rate  authority.  Based on the  above,  GEORGIA's
     capacity  revenues  received  from OPC are now  estimated  to  decrease  by
     approximately  $6  million in 1999,  $15  million in 2000 and $7 million in
     2001.

(N)   In 1998, the Georgia PSC approved a new accounting order for SAVANNAH.
      Under this order, SAVANNAH will reduce electric rates to its small
      business customers, expense additional storm damage accruals and accrue
      additional depreciation on generating assets. For additional information
      concerning the four-year accounting order approved by the Georgia PSC in
      June 1998, reference is made to Note 3 to the financial statements of
      SAVANNAH in Item 8 of the Form 10-K.

(O)  Reference is made to Note 3 to the financial statements of SOUTHERN in Item
     8 and to  Legal  Proceedings  in Item 3 of the Form  10-K  for  information
     relating to petitions for Chapter 11 bankruptcy  relief which were filed in
     the U. S. Bankruptcy Court for the Southern District of Alabama.  Effective
     with the bankruptcy  filing in January 1999, Mobile Energy is accounted for
     under  the  equity  method,  rather  than  being  consolidated  as  before.
     SOUTHERN's  equity  investment in Mobile Energy was $56 million at June 30,
     1999. At June 30, 1999,  Mobile Energy had total assets of $379 million and
     senior debt  outstanding  of $201 million of first  mortgage  bonds and $76
     million   related  to  tax-exempt   bonds.  In  connection  with  the  bond
     financings,  SOUTHERN  provided  certain  limited  guarantees,  in  lieu of
     funding debt service and maintenance  reserve  accounts with cash. In March
     1999,  under an agreement with the  bondholders,  SOUTHERN paid $36,144,000
     pursuant to the guarantees.  The bondholders  reserved the right to seek an
     additional $2,700,000,  which SOUTHERN believes was satisfied by an earlier
     transfer  of funds.  The  ultimate  outcome  of this  matter  cannot now be
     determined.



                                       71
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)



(P)   In 1998, SOUTHERN's Board of Directors authorized SOUTHERN to make open
      market purchases of its common stock in an aggregate amount not to exceed
      $300 million through March 31, 1999. The purpose of the program was to
      provide shares of common stock for the purchase requirements of SOUTHERN's
      various stockholder, employee and outside director stock purchase plans.
      Under the program, 4.4 million shares had been repurchased and 2.4 million
      shares were reissued through June 30, 1999.

      Also, in April 1999, SOUTHERN's board approved the repurchase of up to 50
      million shares of SOUTHERN's common stock over the next two years through
      open market or privately negotiated transactions. The program does not
      establish a target stock price or timetable for specific repurchases.
      Under this program, 18,756,500 shares have been repurchased through August
      10, 1999, with funding provided from SOUTHERN's commercial paper program.

                                       72
<PAGE>


PART II       -  OTHER INFORMATION


Item 1.          Legal Proceedings.


                  Reference is made to the Notes to the Condensed Financial
                  Statements herein for information regarding certain legal and
                  administrative proceedings in which SOUTHERN and its reporting
                  subsidiaries are involved.


Item 4.          Submission of Matters to a Vote of Security Holders.

                 SOUTHERN

                 SOUTHERN held its annual meeting of stockholders on May 26,
                 1999. Each nominee for director of SOUTHERN received the
                 requisite plurality of votes. The vote tabulation was as
                 follows:

                 Nominees                Shares For       Shares Withhold Vote
                 Dorrit J. Bern            578,455,494              8,194,383
                 Thomas J. Chapman         574,296,381             12,353,496
                 A. D. Correll             579,122,020              7,529,457
                 A. W. Dahlberg            578,774,016              7,878,261
                 H. Allen Franklin         579,178,347              7,473,130
                 Bruce S. Gordon           578,717,346              7,934,131
                 L. G. Hardman III         579,123,790              7,528,487
                 Elmer B. Harris           578,931,587              7,719,889
                 David J. Lesar            574,432,727             12,219,949
                 Zack T. Pate              579,029,105              7,624,305
                 Gloria M. Shatto*         578,536,622              8,116,388
                 Gerald J. St. Pe          574,685,364             11,965,332

                 ALABAMA

                 ALABAMA held its annual common stockholders meeting on April
                 23, 1999, and the following persons were elected to serve as
                 directors of ALABAMA:

                     Whit Armstrong                         Thomas C. Meredith
                     David J. Cooper                        William V. Muse
                     A. W. Dahlberg                         John T. Porter
                     Elmer B. Harris                        Robert D. Powers
                     Carl E. Jones, Jr.                     Andreas Renschler
                     Patricia M. King                       C. Dowd Ritter
                     James K. Lowder                        James H. Sanford
                     Wallace D. Malone, Jr.                 John Cox Webb, IV


                 All of the 5,608,955 outstanding shares of ALABAMA's common
                 stock are owned by SOUTHERN and were voted for the election of
                 such directors.

                                       73
<PAGE>


Item 4.          Submission of Matters to a Vote of Security Holders.(Continued)


                 GEORGIA

                 By written consent, in lieu of the annual meeting of
                 stockholders of GEORGIA, effective May 19, 1999, the following
                 persons were elected to serve as directors of GEORGIA:

                     Daniel P. Amos                    James R. Lientz, Jr.
                     Juanita P. Baranco                Zell Miller
                     A. W. Dahlberg                    G. Joseph Prendergast
                     William A. Fickling, Jr.          Herman J. Russell
                     H. Allen Franklin                 Gloria M. Shatto*
                     L. G. Hardman III                 William Jerry Vereen
                     Warren Y. Jobe                    Carl Ware


                 All of the 7,761,500 outstanding shares of GEORGIA's common
                 stock are owned by SOUTHERN and were voted for the election of
                 such directors.

                 GULF

                 By written consent, in lieu of the annual meeting of
                 stockholders of GULF, effective June 29, 1999, the following
                 persons were elected to serve as directors of GULF:

                     Travis J. Bowden                       W. Deck Hull, Jr.
                     Fred C. Donovan                        Joseph K. Tannehill
                     H. Allen Franklin                      Barbara H. Thames


                 All of the 992,717 outstanding shares of GULF's common stock
                 are owned by SOUTHERN and were voted for the election of such
                 directors.

                 MISSISSIPPI

                 MISSISSIPPI held its annual stockholders meeting on April 6,
                 1999, and the following persons were elected to serve as
                 directors of MISSISSIPPI:

                     Paul J. DeNicola**                     Aubrey K. Lucas
                     Edwin E. Downer                        Malcolm Portera
                     Dwight H. Evans                        George A. Schloegel
                     Robert S. Gaddis                       Philip J. Terrell
                     Linda T. Howard                        N. Eugene Warr

                 All of the 1,121,000 outstanding shares of MISSISSIPPI's common
                 stock are owned by SOUTHERN and were voted for the election of
                 such directors.

                                       74
<PAGE>


Item 4.          Submission of Matters to a Vote of Security Holders.(Continued)


                 SAVANNAH

                 SAVANNAH held its annual stockholders meeting on May 18, 1999,
                 and the following persons were elected to serve as directors of
                 SAVANNAH:

                     Archie H. Davis                 G. Edison Holland, Jr.
                     Paul J. DeNicola**              Robert B. Miller, III
                     Walter D. Gnann                 Arnold M. Tenenbaum

                 All of the 10,844,635 outstanding shares of SAVANNAH's common
                 stock are owned by SOUTHERN and were voted for the election of
                 such directors.

                *  Dr. Shatto passed away on June 13, 1999.
              **  Mr. DeNicola resigned effective July 1, 1999.


Item 6.          Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>

                 (a)    Exhibits.

                        <S>               <C>
                        Exhibits 15   -   Letter re: unaudited interim financial information
                                          (a)      ALABAMA
                                          (b)      GEORGIA

                        Exhibit 24    -   (a)    Powers of Attorney and resolutions.  (Designated in the Form
                                                 10-K for the year ended December 31, 1998, File Nos. 1-3526,
                                                 1-3164, 1-6468, 0-2429, 0-6849 and 1-5072 as Exhibits 24(a),
                                                 24(b), 24(c), 24(d), 24(e) and 24(f), respectively, and
                                                 incorporated herein by reference.)

                                      -   (b)    Power of Attorney for GEORGIA.

                        Exhibits 27   -   Financial Data Schedule
                                          (a)    SOUTHERN
                                          (b)    ALABAMA
                                          (c)    GEORGIA
                                          (d)    GULF
                                          (e)    MISSISSIPPI
                                          (f)    SAVANNAH
</TABLE>

                 (b) Reports on Form 8-K.


                        ALABAMA filed a Current Report on Form 8-K
                         dated May 19, 1999:
                              Items reported:                 Item 5
                                                              Item 7
                              Financial statements filed:     None


                                       75


<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          THE SOUTHERN COMPANY

     By   A. W. Dahlberg
          Chairman and Chief Executive Officer
          (Principal Executive Officer)

     By   W. L. Westbrook
          Financial Vice President, Chief Financial Officer and Treasurer
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)

                                                        Date:  August 12, 1999

-------------------------------------------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          ALABAMA POWER COMPANY

     By   Elmer B. Harris
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   William B. Hutchins, III
          Executive Vice President, Chief Financial Officer and Treasurer
          (Principal Financial Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)

                                                         Date:  August 12, 1999

                                       76
<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          GEORGIA POWER COMPANY

     By   David M. Ratcliffe
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   Thomas A. Fanning
          Executive Vice President, Treasurer and Chief Financial Officer
          (Principal Financial Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)


                                                         Date:  August 12, 1999

-------------------------------------------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          GULF POWER COMPANY

     By   Travis J. Bowden
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   A. E. Scarbrough
          Vice President - Finance
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)


                                                        Date:  August 12, 1999

                                       77
<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          MISSISSIPPI POWER COMPANY

     By   Dwight H. Evans
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   Michael W. Southern
          Vice President, Secretary, Treasurer and Chief Financial Officer
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)


                                                        Date:  August 12, 1999

-------------------------------------------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          SAVANNAH ELECTRIC AND POWER COMPANY

     By   G. Edison Holland,  Jr.
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   Kirby R. Willis
          Vice President, Treasurer and Chief Financial Officer
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)

                                                      Date:  August 12, 1999



                                       78