Abby L. Harvey
GHG Monitor
10/31/2014
Total costs for the Kemper County Energy Facility have now reached $6.1 billion, according to a filing by Mississippi Power with the United States Securities and Exchange Commission this week. The latest increase, totaling $330 million, when added to previously reported overruns, results in a $418 million increase in the project’s cost this quarter. In addition, full operation of the plant has been pushed to the first half of 2016. Previous reports stated that the plant would reach full operation in the second half of 2015. According to the filing, the overruns are “primarily related to the extension of the project schedule … as well as start-up and operational readiness activities.” Once completed, the facility will utilize Mississippi lignite, a low-rank brown coal, to produce electricity. The plant will employ a custom integrated gasification combined cycle (IGCC) system and carbon capture and storage technology to produce electricity from the coal with carbon emissions roughly equal to that of natural gas.
Portions of the plant are currently on-line, but the gasification and carbon capture portions of the plant have yet to be placed in service. "The Kemper County plant is generating electricity from natural gas … With construction essentially complete, our focus turns towards the startup of the gasification and carbon capture systems. We believe our recent schedule extension will help preserve the long-term value of this important technology – not just for Mississippi Power customers, but for the U.S. and the world,” said Tom Fanning, Southern Company Chairman, President and CEO, while announcing Southern Company’s third quarter earnings report, also released this week. According to the report, earnings related to the Kemper facility were reported at $493 million or 55 cents per share for the last nine months. In the same time period last year, that total was $704 million or 81 cents per share. This change is “related to increased cost estimates for the construction of Mississippi Power’s Kemper County integrated gasification combined cycle (IGCC) project,” according to the document.
Addressing the delay of full operations at the plant, the SEC filing states that, “Mississippi Power has reviewed the project schedule for the remainder of the Kemper IGCC (including the gasifier and the gas clean-up facilities) as a result of matters related to the time expected to be required for start-up activities and operational readiness, including enhancing the scope of specialized operator training, and currently expects that the remainder of the Kemper IGCC will be placed in service in the first half of 2016. The revised cost estimate above includes projected costs through March 31, 2016. Further extension of the projected in service date is estimated to result in additional base costs of approximately $20 million to $30 million per month.”
The Kemper project has been plagued by cost overruns and delays. The last reported overrun totaled approximately $59 million in additional costs related to “construction, start-up and operational readiness activities, including additional related contingency as well as additional property taxes and insurance.” Overruns comprised of $61 million were reported in May and were attributed to construction issues which were identified as decreases in construction labor productivity on the project due in large part to adverse weather, unexpected excessive craft labor turn-over and unanticipated installation inefficiencies; and $135 million related to the delay of the projected in-service date were also announced at that time.
