8-KRegulation FDOther Events

SOUTHERN CO 8-K Report, Regulation FD Disclosure (Sep 6, 2016)

Filed September 6, 2016For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

This 8-K filing from Southern Company (SO) primarily concerns updates on the Kemper County Integrated Coal Gasification Combined Cycle (IGCC) Project, specifically through July 2016. Mississippi Power submitted its monthly status report to the Mississippi Public Service Commission (PSC), detailing project progress and challenges. The report highlights a schedule extension and a related cost increase of approximately $43 million subject to the existing $2.88 billion cost cap. While one gasifier ('B') experienced operational issues and was taken offline for repairs, the other ('A') is proceeding with startup. Critical upcoming milestones include achieving sustained electricity production from gasifier 'A' by the end of September, followed by the repair and restart of gasifier 'B' by the same date. Failure to meet these milestones could necessitate further revisions to the expected October 31, 2016, in-service date and associated cost estimates.

Key Highlights

  • 1Mississippi Power submitted its July 2016 Monthly Status Report for the Kemper IGCC Project to the Mississippi PSC.
  • 2The project experienced a schedule extension and an approximate $43 million cost increase, subject to the $2.88 billion cost cap.
  • 3Gasifier 'B' operated on lignite for over 60% of the reporting period but was taken offline for repairs.
  • 4Gasifier 'A' is proceeding with startup and is expected to support electricity production by the end of September 2016.
  • 5Successful repair and restart of gasifier 'B' is also scheduled for completion by the end of September 2016.
  • 6Failure to meet these September milestones could lead to further revisions of the October 31, 2016, in-service date and cost estimates.
  • 7Monthly costs for extending the in-service date beyond October 31, 2016, are estimated between $25 million and $35 million, excluding certain 'Cost Cap Exceptions'.

Frequently Asked Questions

This 8-K filing serves to disclose the July 2016 monthly status report for Mississippi Power's Kemper County Integrated Coal Gasification Combined Cycle (IGCC) Project, providing updates on its progress, schedule, and costs to the Mississippi Public Service Commission (PSC) and investors.

The project is facing a schedule extension and an approximate $43 million increase in costs, which are subject to the previously established $2.88 billion cost cap. The expected in-service date is currently targeted for October 31, 2016, but this is contingent on meeting critical milestones in September.

Gasifier 'B' operated on lignite but was taken offline for inspection and expected minor repairs. Gasifier 'A' has incorporated modifications and is proceeding with its startup towards sustained operation. The successful restart of gasifier 'B' is a critical near-term milestone.

If the in-service date is extended beyond October 31, 2016, it is estimated to incur additional base costs of $25 million to $35 million per month. Furthermore, 'Cost Cap Exceptions' like Allowance for Funds Used During Construction (AFUDC) will continue to accrue, estimated at $14 million per month, along with other carrying and operating costs.