What is the total estimated cost of the Kemper IGCC project?

As of June 30, 2016, the estimated cost subject to the Mississippi PSC's $2.88 billion cost cap (net of $245 million in DOE grants and excluding certain items like the lignite mine, CO2 pipeline, AFUDC, and other exceptions) was approximately $5.38 billion. Mississippi Power has stated it will not seek rate recovery for costs exceeding this $2.88 billion cap, net of exclusions.

What financial impact did this updated estimate have on Southern Company?

Southern Company and Mississippi Power recorded pre-tax charges to income totaling approximately $38 million ($23 million after-tax) during the second quarter of 2016 to reflect estimated probable losses associated with the Kemper IGCC project.

When is the Kemper IGCC project expected to be in service?

The project's in-service date is still targeted for September 30, 2016. However, significant testing and commissioning activities are currently underway, and the results of these tests, along with any necessary schedule adjustments, will be reported in the next quarterly filing.

What are the financial implications of any further delays in the Kemper IGCC project's in-service date?

Any extension of the in-service date beyond September 30, 2016, is estimated to add approximately $25 million to $35 million per month in base costs. Additionally, costs for items excluded from the cost cap, such as AFUDC ($14 million per month) and other carrying/operational expenses ($3 million per month), would also increase, potentially adding significant further costs.

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

Summary

Southern Company (SO) has filed an 8-K report detailing an updated cost estimate and associated charges for its Kemper County Integrated Coal Gasification Combined Cycle (IGCC) project. As of June 30, 2016, the estimated cost subject to the Mississippi Public Service Commission's (PSC) $2.88 billion cost cap (net of grants and excluding certain exceptions) was approximately $5.38 billion. Consequently, Southern Company and its subsidiary Mississippi Power recorded pre-tax charges of $38 million ($23 million after-tax) in the second quarter of 2016 to account for probable losses on the project. The report also indicates that Mississippi Power will not seek rate recovery for costs exceeding the $2.88 billion cost cap, net of the aforementioned exclusions. The projected in-service date remains targeted for September 30, 2016, though significant testing and commissioning activities are ongoing. Any further delays beyond this date are estimated to incur additional monthly costs of $25 million to $35 million for base operations, plus substantial costs for excluded items like AFUDC ($14 million per month) and other carrying/operational expenses.

Key Highlights

1Updated Kemper IGCC cost estimate as of June 30, 2016, reached approximately $5.38 billion subject to the $2.88 billion cost cap (net of grants and excluding certain items).
2Southern Company and Mississippi Power recorded $38 million pre-tax ($23 million after-tax) charges in Q2 2016 due to estimated probable losses on the Kemper IGCC project.
3Mississippi Power will not seek rate recovery for Kemper IGCC costs exceeding the $2.88 billion cost cap (net of exclusions).
4The projected in-service date for the Kemper IGCC remains targeted for September 30, 2016, with ongoing testing and commissioning.
5Estimated additional base costs for delays beyond September 30, 2016, range from $25 million to $35 million per month.
6Additional costs for excluded items (AFUDC, carrying costs, etc.) are estimated at approximately $17 million per month for any extension beyond the target in-service date.

SOUTHERN CO 8-K Report, Financial Results (Jul 26, 2016)

Summary

Key Highlights

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