Summary
Southern Company (SO) filed an 8-K on April 28, 2015, primarily to update investors on the Kemper County Integrated Coal Gasification Combined Cycle (IGCC) project, a significant undertaking by its subsidiary Mississippi Power. The report indicates that as of March 31, 2015, the estimated costs subject to the Mississippi Public Service Commission's (PSC) $2.88 billion cost cap (net of grants and excluding certain exceptions) for the Kemper IGCC project had reached approximately $4.94 billion. This implies a substantial overrun against the established cap.
Key Highlights
- 1Kemper IGCC project costs subject to the $2.88 billion cost cap reached $4.94 billion as of March 31, 2015.
- 2Mississippi Power does not intend to seek rate recovery or joint owner contributions for costs exceeding the $2.88 billion cost cap (net of grants and excluding exceptions).
- 3Southern Company and Mississippi Power recorded pre-tax charges of approximately $9 million ($5.6 million after-tax) in Q1 2015 due to previous cost estimate changes for Kemper.
- 4The filing reiterates that future cost increases or delays for the Kemper IGCC project could arise from various factors, including labor, weather, supply chain issues, design problems, and start-up activities.
- 5Any further changes in estimated costs to complete and start-up the Kemper IGCC project that are subject to the cost cap are expected to be material to Southern Company's and Mississippi Power's financial statements.
- 6The ultimate outcome of the Kemper IGCC project's financial implications remains uncertain.
- 7The report includes a cautionary note regarding forward-looking statements and factors that could cause actual results to differ materially from projections.