Southern Co delays advanced coal plant to 2015 amid rising costs

Posted by Joseph R. Fonseca
Tuesday, April 29, 2014
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Southern Co will take a $235 million charge in the first quarter and delay the startup of its $5.5 billion coal-gasification power plant in Kemper County, Mississippi, the company said in a filing with regulators on Tuesday.

Southern Co, based in Atlanta, is scheduled to release its first-quarter earnings on Wednesday.

Southern has previously taken $729 million in charges related to more than $1 billion in cost overruns at the 582-megawatt Kemper County plant, one of only two integrated gasification combined-cycle (IGCC) plants in the nation.

Mississippi Power, Southern's smallest utility, owns the facility and plans to complete the gas-fired, combined cycle portion of the project this summer.

However, the in-service date for Kemper's complex gasification system has been delayed to the first half of 2015, one year later than initially planned.

"The company remains focused on working safely and tirelessly to complete the facility and bring it online for the benefit of customers for decades to come," Mississippi Power said in a statement.

The power industry has been closely watching progress at the Kemper plant. Because it will be able to capture carbon dioxide emissions, the Kemper plant has been cited as a model for future coal-plant design by the U.S. Environmental Protection Agency which has proposed strict limits on carbon pollution from coal-fired power plants.

However, Southern officials have asked the EPA to refrain from using Kemper as a standard for the industry because of its unique location.

Southern blamed the latest cost overrun on lower construction productivity due to adverse weather at the site, unexpected worker turnover and installation "inefficiencies" related to the complex piping in the gasification system.

Earlier this year, Southern reported additional construction costs of $184 million. On Tuesday, the company revised its cost estimate by another $61 million and added $135 million related to the delay in the expected in-service date.

With the $380 million increase, Kemper's price tag now exceeds $5.53 billion, more that twice the $2 billion figure announced when the plant was proposed.

Mississippi Power can only recover $3.8 billion of Kemper costs through customer rates and the sale of securitized bonds. Customers began paying higher rates related to the plant last year after a lengthy battle with state regulators.

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