Summary
This 8-K filing from Southern Co. (SO) and its subsidiary Mississippi Power Company provides an update on the Kemper County Integrated Gasification Combined Cycle (IGCC) project. Mississippi Power has revised its estimated completion cost to approximately $4.06 billion, an increase from previous estimates. This revision necessitates a pre-tax charge of $40 million ($25 million after-tax) in the fourth quarter of 2013, in addition to previously recognized charges totaling $1.1 billion ($704 million after-tax). Investors should note that the project is subject to significant risks, including potential further cost increases and schedule extensions due to various factors such as labor, weather, equipment quality, contractor performance, and the complexities of first-of-a-kind technology. 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" and net of US Department of Energy grants. The ultimate outcome and recoverability of these costs remain uncertain.
Key Highlights
- 1Mississippi Power revised Kemper IGCC project cost estimate to approximately $4.06 billion (net of $245 million in DOE grants).
- 2An additional pre-tax charge of $40 million ($25 million after-tax) will be recorded for Q4 2013, on top of $1.1 billion previously recognized.
- 3The project faces significant risks of further cost increases and schedule delays due to complexities, labor, weather, and supply chain issues.
- 4Mississippi Power will not seek rate recovery for costs exceeding the $2.88 billion cost cap, except for defined "Cost Cap Exceptions."
- 5The company submitted its monthly status report for the Kemper IGCC project to the Mississippi PSC.
- 6The ultimate outcome of project costs and recoverability is uncertain and could result in material charges.
- 7The filing includes a cautionary note regarding forward-looking statements and factors that could materially affect actual results.