8-KEarnings & ResultsRegulation FD

SOUTHERN CO 8-K Report, Financial Results (Apr 23, 2013)

Filed April 23, 2013For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

This 8-K filing from Southern Company (SO) on April 23, 2013, primarily addresses significant cost overruns and a substantial pre-tax charge related to Mississippi Power's Kemper integrated gasification combined cycle (IGCC) project. The company revised its estimated construction cost for the Kemper IGCC project upward to approximately $3.42 billion (net of grants and certain exceptions), an increase from the previously certificated cost of $2.4 billion and the approved cost cap of $2.88 billion. As a result of these cost escalations, Mississippi Power and Southern Company will recognize a pre-tax charge of $540 million ($333 million after tax) in their first quarter 2013 financial statements. This charge reflects the estimated probable loss from costs exceeding the $2.88 billion cost cap, excluding specific exceptions approved by the Mississippi Public Service Commission (PSC). Investors should note that while Mississippi Power intends to finance prudently-incurred costs up to the $2.88 billion cap and accrued AFUDC through securitization, they do not plan to seek joint owner contributions or rate recovery for costs exceeding this cap, except for the previously defined Cost Cap Exceptions. The company also cautions that further cost increases or schedule delays are possible, which could lead to additional material charges.

Key Highlights

  • 1Mississippi Power revised its estimated construction cost for the Kemper IGCC project to approximately $3.42 billion, a significant increase from the prior estimate.
  • 2Southern Company and Mississippi Power will record a pre-tax charge of $540 million ($333 million after tax) in Q1 2013 due to anticipated cost overruns.
  • 3The revised cost estimate exceeds the Mississippi PSC's approved construction cost cap of $2.88 billion.
  • 4Mississippi Power will not seek rate recovery for costs exceeding the $2.88 billion cap, except for specific 'Cost Cap Exceptions' and AFUDC.
  • 5The company acknowledges the possibility of further cost increases and schedule delays, which could result in additional charges.
  • 6The filing reiterates the potential for material impacts on future financial results if additional unrecoverable costs are identified.

Frequently Asked Questions