What is the current estimated total cost for the Kemper IGCC project?

As of June 30, 2014, Mississippi Power's cost estimate for the Kemper IGCC remains approximately $4.44 billion. This figure is net of $245 million in grants from the U.S. Department of Energy and excludes the costs of the lignite mine, carbon dioxide pipeline facilities, allowance for funds used during construction, and certain other specified exceptions.

How has the Kemper IGCC project's cost changed in the second quarter of 2014?

There was no material change to the estimated cost for the Kemper IGCC that is subject to the Mississippi PSC's $2.88 billion cost cap during the three-month period ended June 30, 2014. As a result, Mississippi Power did not record any additional charges to earnings for the quarter related to this cost cap.

What are the potential risks that could lead to future cost increases or delays for the Kemper IGCC project?

The project faces risks inherent in its 'first-of-a-kind' technology. Potential factors include labor costs and productivity, adverse weather, shortages or inconsistent quality of materials and labor, contractor delays, non-performance under agreements, operational performance issues, unforeseen engineering problems, and challenges during start-up activities, including major equipment failure or system integration.

How will future cost increases for the Kemper IGCC project be reported?

Any further cost increases and/or extensions of the in-service date that impact the $2.88 billion cost cap (net of DOE grants and excluding cost cap exceptions) will be reflected in Southern Company's and Mississippi Power's future financial statements. These changes could be material to their earnings.

SOUTHERN CO 8-K: Earnings & Results & Regulation FD

Summary

This SEC filing provides an update on Mississippi Power Company's Kemper County Integrated Coal Gasification Combined Cycle (IGCC) project. As of June 30, 2014, the estimated cost to complete the project remains approximately $4.44 billion, net of Department of Energy grants and excluding certain cost exceptions. Importantly, there were no material changes to the estimated cost subject to the Mississippi Public Service Commission's (PSC) $2.88 billion cost cap during the second quarter of 2014, meaning no additional charges to earnings were recorded in that period. Investors should note that the project's complexity as a "first-of-its-kind" technology presents ongoing risks. Future cost increases or delays in the in-service date could arise from various factors including labor, materials, equipment, and unforeseen engineering issues. Any further cost overruns or schedule extensions, particularly those impacting the $2.88 billion cost cap, will be reflected in future financial statements and could be material. Mississippi Power has submitted its monthly status report for June 2014 to the Mississippi PSC.

Key Highlights

1Mississippi Power's Kemper IGCC project cost estimate remains $4.44 billion (net of DOE grants), excluding specific cost exceptions.
2No material cost changes for the Kemper IGCC within the $2.88 billion Mississippi PSC cost cap were reported for Q2 2014.
3Consequently, no additional charges to earnings were recorded in the second quarter of 2014 related to the Kemper IGCC.
4The filing reiterates the potential for future cost increases and delays due to the project's "first-of-a-kind" nature and various construction risks.
5Any future cost increases impacting the cost cap will be reflected in Southern Company's and Mississippi Power's future financial statements.
6Mississippi Power submitted its monthly status report for the Kemper IGCC project through June 2014 to the Mississippi PSC.
7The filing includes a cautionary note on forward-looking statements, highlighting risks and uncertainties that could impact actual results.

SOUTHERN CO 8-K Report, Financial Results (Jul 29, 2014)

Summary

Key Highlights

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