Summary
This 8-K filing from Southern Co. (SO) addresses significant developments concerning Mississippi Power Company's (a subsidiary) Kemper County Integrated Gasification Combined Cycle (IGCC) project. The primary focus is on the project's extended construction schedule and updated cost estimates. Mississippi Power has revised the in-service date to the fourth quarter of 2014, citing issues such as lower-than-planned piping installation and adverse weather conditions. Furthermore, the revised cost estimate for the Kemper IGCC has increased to approximately $4.02 billion, net of DOE grants. Notably, Mississippi Power will not seek joint owner contributions or rate recovery for costs exceeding the $2.88 billion cap, except for specific "Cost Cap Exceptions." As a result of this projected loss, Southern Company and Mississippi Power will recognize an additional pre-tax charge of $150 million ($93 million after tax) in their third quarter 2013 financial statements, adding to the $990 million ($611 million after tax) previously recorded.
Key Highlights
- 1Kemper IGCC project in-service date extended to Q4 2014.
- 2Revised total cost estimate for Kemper IGCC is approximately $4.02 billion (net of DOE grants).
- 3Mississippi Power will not seek rate recovery for costs exceeding the $2.88 billion cap, except for specific exceptions.
- 4An additional pre-tax charge of $150 million ($93 million after tax) will be recognized in Q3 2013 for estimated probable losses.
- 5Previous charges totaling $990 million ($611 million after tax) have already been recognized.
- 6Project delays are attributed to piping installation issues and adverse weather.
- 7There is a risk of further schedule extensions and cost increases due to various factors, including 'first-of-a-kind' technology challenges and potential material non-recoverable costs.