Mississippi Power’s Kemper County energy facility has reached its most significant milestone to date with the testing of one of the project’s coal gasification units.
The test of the first of two coal gasification units, or gasifiers, involves the injection of sand into the equipment under operational conditions. The test is used as a major step before injecting lignite in the gasifiers for final operational testing.
“The testing of the gasifier at Kemper is a huge step toward achieving full operation of the project in the first half of 2016,” said Ed Holland, chairman and CEO of Mississippi Power. “This is one of the most important steps toward completion of the project. It demonstrates the first gasifier and related systems are working as designed to support the project’s generating capability of producing syngas from lignite.”
Syngas, or synthesis gas, will be supplied to Kemper’s combined cycle power plant from the gasification of locally-mined Mississippi lignite once the gasifiers are operational. The plant has been operating successfully using natural gas and producing power for customers since August 2014.
“By having demonstrated its reliability over the past 14 months, the combined cycle’s dual-fuel design to use both syngas and natural gas should provide fuel flexibility for the benefit of customers,” said Holland. “Following the completion of the testing of both gasifiers, our next step will be to inject lignite into the gasifiers and produce syngas, which is expected to occur in the first part of next year.”
Additionally today, Mississippi Power filed its monthly report for September with the Mississippi Public Service Commission. As noted in the company’s August monthly report, the company was reviewing the schedule for the project. Based on the completion of the review, the Kemper project’s schedule remains unchanged with completion still expected in the first half of 2016.
Also noted in last month’s report was the previous cost estimate for the Kemper project that included costs through March 31, 2016. The company has revised its cost estimate subject to the cost cap for the Kemper project to include approximately $110 million in cost increases for September. This increase includes approximately $20 million of adjustments related to start-up and commissioning activities as well as operational readiness activities during the month, and approximately $90 million of additional schedule costs for the months of April-June of 2016.
These costs are in addition to previous adjustments made in the July and August reports, bringing the total adjustments subject to the cost cap for the third quarter to approximately $150 million. Customers will not pay for any of this increase in capped costs.
Mississippi Power, a subsidiary of Southern Company (NYSE: SO), produces safe, reliable and environmentally responsible energy for more than 186,000 customers in 23 southeast Mississippi counties. Mississippi Power earned the 2015 ReliabilityOneTM Award for outstanding midsize utility for excellence in storm restoration and recovery efforts as well as being a leader in reliability, customer service and safety. Visit our websites at mississippipower.com and mississippipowernews.com, like us on Facebook, and follow us on Twitter, LinkedIn, Google+ and YouTube.
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this release is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning the projected cost, benefits and schedule for the completion of construction and start-up of the integrated coal gasification combined cycle project in Kemper County, Mississippi (the “Kemper IGCC”). Mississippi Power cautions that there are certain factors that could cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Mississippi Power; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Mississippi Power’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: changes in tax and other laws and regulations to which Mississippi Power is subject as well as changes in application of existing laws and regulations; the ability to control costs and avoid cost overruns during the development and construction of facilities, which include the development and construction of generating facilities with designs that have not been finalized or previously constructed, including changes in 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 (including major equipment failure and system integration), and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by the Mississippi Public Service Commission (“PSC”)); the ability to construct facilities in accordance with the requirements of permits and licenses, to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction; advances in technology; actions related to cost recovery for the Kemper IGCC, including the ultimate impact of the 2015 decision of the Mississippi Supreme Court, the Mississippi PSC’s August 2015 interim rate order, and related legal or regulatory proceedings, Mississippi PSC review of the prudence of Kemper IGCC costs and approval of permanent rate recovery plans, actions relating to proposed securitization, the ability to utilize bonus depreciation, which currently requires that assets be placed in service in 2015, satisfaction of requirements to utilize investment tax credits and grants, and the ultimate impact of the termination of the proposed sale of an interest in the Kemper IGCC to South Mississippi Electric Power Association; and the ability of counterparties of Mississippi Power to make payments as and when due and to perform as required. Mississippi Power expressly disclaims any obligation to update any forward-looking information.