AT THE MAJOR CCS PROJECTS: KEMPER

Tamar Hallerman
GHG Monitor
11/9/12

AT KEMPER: SOUTHERN CEO SAYS CONSTRUCTION, COSTS ‘ON TARGET’

Southern Company Chairman, CEO and President Thomas Fanning said this week that despite some early cost overruns at its subsidiary’s carbon capture and storage plant in eastern Mississippi, he is confident the company can keep balance sheets and construction schedules under control. In a call with investors announcing third-quarter earnings, Fanning said that construction at Mississippi Power’s 582 MW Kemper County Integrated Gasification Combined Cycle plant remains on schedule—with plans to begin commercial operations in May 2014—and that costs remain “on target” at or below the project’s $2.88 billion hard rate recovery cap. “We continue to actively manage ongoing pressures on costs and schedule, which are typical for a project of this scale,” Fanning said. Kemper’s current cost projections are nearly $500 million above initial estimates, a big sticking point for project opponents such as the Sierra Club.

During the call, Fanning assured investors that the Kemper Project would not have the same fate as Duke Energy’s IGCC project at Edwardsport, Ind., which began startup last month more than $1.3 billion over budget. Fanning said Southern’s IGCC project is different primarily because of the utility’s large size and wide area of expertise. He emphasized that the gasification technology being used at the facility was developed by Southern and not purchased from a third party. “We grew this technology,” he said. Fanning said the utility’s engineering and construction services subsidiary also allows the project to be a self-built effort. “We know how to build stuff,” he said. “We think we’re going to do a great job here.” The Kemper County project, however, is facing an ongoing legal challenge from the state chapter of the Sierra Club in local chancery court over the plant’s certificate, which has delayed the project from being able to collect extra money from its nearly 200,000 ratepayers to help cover capital costs.

In terms of construction progress at Kemper, Fanning said installation of the plant gasifier is moving forward “exceptionally well” and that the CO2 absorbers are already in place. Prior to plant startup, planned for second quarter 2013, the utility must also complete the remaining gasifier lift as well as finish installing the air compressor and water plant, Fanning added. Offtake contracts for the project are finalized, as are the natural gas and effluent water pipelines for the site. The project, which has a $270 million grant from the Department of Energy, plans on capturing 65 percent of the plant’s emissions and piping the CO2 to nearby depleted oil fields for enhanced oil recovery.

Fanning Touts TRIG 

Fanning touted the potential global market for its gasification equipment, Transport Integrated Gasification (TRIG) technology. Last week, Southern Company subsidiary Southern Generation Technologies announced its partnership with the Houston-based engineering and construction contractor KBR to market TRIG to power companies that utilize low-rank coal, especially those in countries with large reserves such as India and China. “You just think about megawatts of need. In the not-too-distant future, China needs to add 300,000 megawatts of generation; India, 100,000 megawatts of generation. Both India and China lend themselves to the kind of low-grade coal that is perfect as a fuel resource for our TRIG technology. Now, we’re not going to get all that. We’re going to get some segment out of it, we believe, and we look forward to that,” he said.

The Atlanta-based utility reported third quarter earnings of $976 million at $1.11 per share, up slightly from a year ago.