Abby L. Harvey
GHG Monitor
2/6/2015
Southern Co. this week reported an additional $45 million in cost overruns at the Kemper County Energy Facility, being built by subsidiary Mississippi Power, bringing the total cost of the project currently to $6.17 billion. The latest increase is due to “operational readiness, start-up activities and fuel, and the completion of construction of the Kemper [integrated coal gasification combined cycle], including construction support costs during start-up and commissioning,” Southern Co. said in a filing with the U.S. Securities and Exchange Commission this week. “As a result of the revised cost estimate, Southern Company and Mississippi Power recorded total pre-tax charges to income for the estimated probable losses on the Kemper IGCC of approximately $70 million ($43 million after-tax) during the fourth quarter 2014, which are in addition to previous charges totaling $1.98 billion ($1.22 billion after-tax) recognized in prior years and through September 30, 2014,” the filing says.
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. After several reported delays, the plant is currently expected to reach full operation in 2016.
In its filing, Southern Co. outlined several factors that could lead to further schedule delays and/or cost overruns for the Kemper facility. “Any future cost increases and/or extensions of the in-service date with respect to the Kemper IGCC may result from factors including, but not limited to, labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under construction or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities for this first-of-a-kind technology (including major equipment failure and system integration), and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by the Mississippi PSC),” the filing says.
