Summary
This 8-K filing from Southern Company (SO), filed on October 2, 2013, primarily concerns updates regarding the Kemper County Integrated Coal Gasification Combined Cycle (IGCC) Project by its subsidiary, Mississippi Power Company. The key takeaway for investors is a revised construction schedule for the Kemper IGCC project, now expected to be in service later in 2014 than the previously anticipated May 2014 date. This delay is attributed to abnormally wet weather and lower-than-planned construction labor productivity. Furthermore, the filing discusses the implications of this schedule extension on the project's investment tax credits. Mississippi Power will need to recapture $133 million in Phase I investment tax credits and will reclassify them as a liability. While this impacts the financial accounting, the company anticipates no change to customer rates under the existing Seven-Year Rate Plan due to mitigating factors like additional bonus depreciation. Investors should monitor future reports for updated cost estimates and the final in-service date.
Key Highlights
- 1Mississippi Power Company's Kemper IGCC project has a revised in-service date, now expected to be later in 2014, extending beyond the original May 2014 target.
- 2The schedule extension is primarily due to adverse weather conditions and lower-than-expected construction labor productivity.
- 3The company will reclassify $133 million in Phase I investment tax credits as a liability due to the schedule extension.
- 4Mississippi Power anticipates no change to customer rates under the current Seven-Year Rate Plan, with mitigating factors offsetting the loss of tax credit amortization.
- 5Specific revisions to the schedule and potential changes to the construction cost estimate (currently capped at $2.88 billion) are expected to be finalized and reported in late October 2013.
- 6The company acknowledges the risk of further schedule extensions and cost increases due to factors like labor costs, weather, equipment issues, and contractor performance.