What is the primary purpose of this 8-K filing?

The primary purpose of this 8-K filing is to provide an update to investors and the Mississippi Public Service Commission (PSC) regarding the cost status of Mississippi Power's Kemper County Integrated Coal Gasification Combined Cycle (IGCC) project. It discloses an estimated $62 million in additional costs subject to the project's cost cap.

What is the $2.88 billion cost cap and what does it exclude?

The $2.88 billion cost cap is the limit set by the Mississippi PSC for the Kemper IGCC project's costs, net of $245 million in grants from the U.S. Department of Energy. It excludes the costs of the lignite mine, CO2 pipeline facilities, allowance for funds used during construction, and certain other exceptions like change of law or force majeure.

Will Mississippi Power seek rate recovery for costs exceeding the $2.88 billion cap?

Mississippi Power has stated that it does not intend to seek rate recovery for construction costs that exceed the $2.88 billion cost cap, excluding the specific Cost Cap Exceptions mentioned in the filing.

What are the main risks associated with the Kemper IGCC project highlighted in this report?

The report highlights risks such as labor costs and productivity, adverse weather, equipment and material shortages, contractor delays, unforeseen engineering or design problems, complexities with start-up of the novel technology, and potential operational performance issues. These factors could lead to further cost increases and extensions of the in-service date.

SOUTHERN CO 8-K: Regulation FD

Summary

Southern Company and its subsidiary, Mississippi Power Company, filed a Current Report on Form 8-K on December 1, 2015, to provide an update on the Kemper County Integrated Coal Gasification Combined Cycle (IGCC) project. The report highlights an estimated $62 million in additional costs subject to the Mississippi Public Service Commission's (PSC) $2.88 billion cost cap (net of DOE grants and excluding certain exceptions). These additional costs are primarily related to commissioning, start-up, and operational readiness activities. Investors should note that Mississippi Power does not intend to seek rate recovery for costs exceeding the established cost cap, excluding specific exceptions. The filing also emphasizes the inherent risks and uncertainties associated with this first-of-its-kind technology, including potential further cost increases and schedule delays due to various factors such as labor, weather, equipment, and unforeseen engineering issues. The ultimate outcome for the project remains uncertain.

Key Highlights

1Mississippi Power reported an additional estimated $62 million in costs for the Kemper IGCC project, subject to the $2.88 billion cost cap.
2These additional costs are primarily for commissioning, start-up, and operational readiness.
3Mississippi Power stated it will not seek rate recovery for costs exceeding the $2.88 billion cost cap, barring defined exceptions.
4The filing acknowledges that further cost increases and schedule delays are possible due to various risks associated with the project.
5The report refers investors to previous filings (10-K and 10-Q) for more detailed financial and operational information regarding the Kemper IGCC.
6The project involves unique, first-of-its-kind technology, introducing inherent risks to completion and operational performance.
7The ultimate financial impact and outcome of the Kemper IGCC project remain uncertain.

SOUTHERN CO 8-K Report, Regulation FD Disclosure (Dec 1, 2015)

Summary

Key Highlights

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