SOUTHERN WITHDRAWS $1.5B LOAN GUARANTEE REQUEST FOR KEMPER PLANT

Tamar Hallerman
GHG Monitor
4/5/13

Southern Company confirmed this week that it has withdrawn its request for a $1.5 billion federal loan guarantee to finance its Kemper County gasification plant currently under construction in eastern Mississippi. A spokesman for the Atlanta-based utility said the company can borrow more money for its 582 MW integrated gasification combined cycle plant elsewhere at lower rates than what is available with the Department of Energy program. “In the case of the Kemper County energy facility, Mississippi Power has secured financing at a lower rate than our certified projected Department of Energy loan, reducing overall costs to customers,” Southern Company spokesman Tim Leljedal said in a written response.

Southern had applied for the loan guarantee in 2008 on behalf of its subsidiary Mississippi Power, which is running the carbon capture and storage demonstration project also known as Plant Ratcliffe. Reuters initially reported that the utility cancelled its application in late January, days after Mississippi Power and the state Public Service Commission finalized a settlement agreement giving the company more options to cover the project financing. The agreement, quickly blessed by the state’s Republican-controlled legislature and Governor, allowed Mississippi Power to sell up to $1 billion in bonds to cover construction and financing costs for the plant above the $2.4 billion cleared for rate recovery by the PSC.

Leljedal said the loan guarantee decision was not related to the bill passed by the legislature or a 15 percent rate increase approved recently by the PSC. “Since 2010, Mississippi Power has issued $1.1 billion of additional debt—during a time of very low interest rates—and the majority of these funds were used for Kemper construction,” he said. “Along with potential proceeds from securitization debt, a portion of the project will be financed at debt costs well below what was originally contemplated for the project, with the resulting savings benefiting Mississippi Power customers.”

Costs Continue to Rise at Kemper 

The news comes as costs for the IGCC facility, which will be capturing roughly 65 percent of CO2 emissions for storage via local enhanced oil recovery operations, creep upwards of $3.2 billion when including the cost of the facility, lignite mine and CO2 pipeline. Construction work continues on the facility, which Mississippi Power says is more than 75 percent complete ahead of plant startup, expected to occur later this year. While the local chapter of the Sierra Club, perhaps the project’s most vocal critic, has questioned the rate of the facility’s progress,  Mississippi Power maintains that the plant will come online as planned in May 2014, which the project operator must adhere to if it wants to keep federal investment tax credits certified for the project in 2009. A company spokesperson said the tax credits—which are for building an advanced coal generation facility—have a five-year implementation deadline that ends in May 2014. Leljedal said the financing decision will have “no impact” on the project’s schedule.