Summary
This 8-K filing from Southern Company (SO) provides an update on the Kemper County Integrated Coal Gasification Combined Cycle (IGCC) Project through November 2016, as reported by its subsidiary, Mississippi Power. The key takeaway for investors is that the project's in-service date has been pushed to January 2017, with an associated cost increase. This follows delays encountered with the gas clean-up systems for one of the gasifiers. The filing details a revised cost estimate for the Kemper IGCC, which includes an additional $34 million subject to the Mississippi Public Service Commission's (PSC) $2.88 billion cost cap. This increase covers modifications for operational readiness and projected schedule costs. The company also highlights ongoing risks and potential further cost increases and schedule extensions, including challenges with integrating both gasifiers and maintaining nitrogen supply. These factors could lead to additional monthly costs if the in-service date is extended beyond January 31, 2017.
Key Highlights
- 1Mississippi Power has submitted its November 2016 status report for the Kemper IGCC project, indicating an expected in-service date in January 2017.
- 2Challenges with gasifier 'B's' clean-up systems have delayed the integrated operation of both gasifiers.
- 3The revised cost estimate for the Kemper IGCC, subject to the $2.88 billion cost cap, reflects an increase of approximately $34 million through January 31, 2017.
- 4Potential for further cost increases and schedule extensions beyond January 31, 2017, exists due to integration challenges, nitrogen supply risks, and other operational factors.
- 5Extended in-service dates beyond January 31, 2017, are estimated to incur additional monthly costs of $25 million to $35 million for base operational expenses and $14 million per month for AFUDC, excluding other Cost Cap Exceptions.
- 6The ultimate outcome of the Kemper IGCC project's costs and timeline remains uncertain.