What is the main reason for the delay in the Kemper IGCC project's in-service date?

The primary reason for the delay is the ongoing start-up and commissioning of the first-of-its-kind technology. Specifically, gasifier 'B' required more inspection and repair time than initially expected due to ash removal issues, which has impacted the overall schedule for both gasifier trains and the integration of all systems for electricity production.

How much has the cost estimate for the Kemper IGCC project increased?

The cost estimate subject to the $2.88 billion cost cap has increased by approximately $33 million as of the August 2016 report. This includes $5 million for specific repairs and modifications to gasifier 'B' and approximately $28 million related to the extended expected in-service date.

What are the potential financial implications if the Kemper IGCC project is further delayed beyond November 30, 2016?

If the in-service date is extended beyond November 30, 2016, Mississippi Power anticipates additional base costs of approximately $25 million to $35 million per month. These costs cover start-up labor, materials, fuel, and operational resources. Additionally, costs not subject to the $2.88 billion cap, such as Allowance for Funds Used During Construction (AFUDC), carrying costs, and consulting/legal fees, would also increase.

Are there any risks of further cost increases or schedule extensions for the Kemper IGCC project?

Yes, the company explicitly states that further cost increases and/or extensions of the in-service date may result from various factors. These include difficulties integrating systems for sustained operations, major equipment failure, unforeseen engineering or design problems, operational performance issues, and potential repairs or modifications. The successful restart of gasifier 'B' and generation of electricity by the end of October are critical next steps; failure to meet this timeline could necessitate further revisions to the schedule and cost estimates.

SOUTHERN CO 8-K: Regulation FD

Summary

Southern Company (SO) filed an 8-K on October 3, 2016, primarily to disclose updates regarding Mississippi Power's Kemper County Integrated Coal Gasification Combined Cycle (IGCC) Project. The filing provides the August 2016 monthly status report to the Mississippi Public Service Commission (PSC). Key information for investors centers on the continued delays and cost overruns associated with the Kemper IGCC project, a first-of-its-kind technology. The report indicates that Mississippi Power expects the Kemper IGCC to be placed in service by November 30, 2016, a delay from previous projections. This revised timeline is attributed to ongoing start-up and commissioning activities, particularly issues with gasifier "B" requiring more inspection and repair time than anticipated. Consequently, the project's cost estimate subject to the $2.88 billion cap has increased by approximately $33 million, reflecting both the extended timeline and specific repairs. The company also provided updated monthly cost estimates for potential further delays, which could add $25 million to $35 million per month in base costs, plus additional costs not subject to the cap like AFUDC.

Key Highlights

1Mississippi Power submitted its August 2016 monthly status report for the Kemper IGCC project to the Mississippi PSC.
2The Kemper IGCC project's in-service date has been revised to November 30, 2016, due to ongoing start-up and commissioning activities.
3Gasifier "B" experienced delays due to extended inspection and repair time for ash removal.
4The cost estimate for the Kemper IGCC project, subject to the $2.88 billion cap, has increased by approximately $33 million.
5The increase includes $5 million for repairs/modifications to gasifier "B" and $28 million related to the extended in-service date.
6Potential further delays beyond November 30, 2016, could incur additional base costs of $25 million to $35 million per month.
7Costs not subject to the $2.88 billion cap, such as AFUDC, are also expected to increase with further delays.

SOUTHERN CO 8-K Report, Regulation FD Disclosure (Oct 3, 2016)

Summary

Key Highlights

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