What is the main update regarding the Kemper IGCC project?

The main update is that Mississippi Power has identified additional estimated costs of approximately $88 million that fall under the project's cost cap, and the in-service date is now expected to be later in 2015, rather than the originally planned second quarter of 2015. This is due to challenges with start-up activities and operational readiness.

Will these additional costs impact customer rates?

Mississippi Power has stated it will not seek rate recovery or joint owner contributions for any costs exceeding the $2.88 billion cost cap, net of grants and excluding certain specified exceptions. Therefore, these identified $88 million in additional costs, if they remain within the cost cap, are intended to be absorbed by Mississippi Power.

When will more precise information on cost and schedule be available?

Revised projections for the in-service date and the cost estimate subject to the $2.88 billion cost cap are expected to be completed and reflected in the Kemper IGCC Project Monthly Status Report through September 2014, which Mississippi Power anticipates filing by the end of October 2014.

What are the main risks associated with the Kemper IGCC project's completion?

The filing outlines several risks, including labor costs and productivity, adverse weather, equipment and material quality/availability, contractor performance, unforeseen engineering or design problems, issues with start-up activities for this first-of-a-kind technology, and potential major equipment failure or system integration challenges. These factors could lead to further cost increases and/or extensions of the in-service date.

SOUTHERN CO 8-K: Regulation FD

Summary

This 8-K filing from Southern Company, dated October 2, 2014, primarily provides an update on the Mississippi Power Company's Kemper County Integrated Coal Gasification Combined Cycle (IGCC) Project. The key takeaway for investors is that Mississippi Power has identified an additional estimated $88 million in costs subject to the project's $2.88 billion cost cap (net of grants and excluding certain exceptions). Furthermore, the project's in-service date is being reviewed and is now expected to be later in 2015 than the previously scheduled second quarter of 2015, due to start-up and operational readiness activities. Mississippi Power has explicitly stated it will not seek rate recovery or joint owner contributions for costs exceeding the established cost cap, with specific exceptions. The company is expected to provide revised cost estimates and in-service dates by the end of October 2014 in its September 2014 monthly status report. Investors should monitor these upcoming reports for precise figures and understand that further delays or cost increases are possible, given the project's complexity and the inherent risks associated with this first-of-its-kind technology.

Key Highlights

1Mississippi Power identified an additional $88 million in estimated costs for the Kemper IGCC project, subject to the $2.88 billion cost cap (net of grants and excluding certain exceptions).
2The projected in-service date for the Kemper IGCC project is now expected to be later in 2015, delayed from the previously scheduled second quarter of 2015.
3The delay is attributed to start-up activities and operational readiness, including specialized operator training.
4Mississippi Power will not seek rate recovery or joint owner contributions for costs exceeding the $2.88 billion cost cap, excluding specified exceptions.
5Revised cost estimates and in-service dates are anticipated to be finalized and filed by the end of October 2014.
6The filing references numerous potential risks and uncertainties that could lead to further cost increases or schedule extensions, including labor issues, weather, equipment quality, and unforeseen engineering problems.

SOUTHERN CO 8-K Report, Regulation FD Disclosure (Oct 2, 2014)

Summary

Key Highlights

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