Mississippi Power’s monthly status report filed with the state Public Service Commission includes an additional $380 million pre-tax estimated probable loss for the first quarter of 2014, and a possible extension of the plant’s expected in-service date for the gasification system to the first half of 2015.
As reported earlier this month, the company is experiencing decreases in construction labor productivity due to adverse weather, unexpected excessive craft labor turnover and unanticipated installation inefficiencies.
The company will not seek to recover the increase from customers. Customers will not pay a penny of cost above the limit agreed to by regulators and legislators.
Mississippi Power currently expects to place the combined cycle and the associated common facilities portion of the project in service in the summer of 2014 and continues to focus on completing the remainder of the Kemper plant, including the gasification system.
As a result of construction issues identified, as well as the risk of additional factors that have the potential to further extend construction and start-up, the in-service date for the gasification system is expected to occur in the first half of 2015.
Extending the expected in-service date into 2015 could impede the company’s ability to secure some tax benefits under current law. The company will work with the Mississippi Public Utilities Staff to determine if it can mitigate the impact to customers.
“Mississippi Power is committed to the success of this 21st-century coal project and to providing stable energy prices for customers,” CEO Ed Holland said. “Our investment in integrated coal gasification and the Kemper project is further evidence of the company’s belief that this technology represents one method to achieve coal’s future in energy production and our commitment to a diverse fuel mix.”
Cautionary Note Regarding Forward-Looking Statement
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 and schedule for the completion of construction and start-up of the Kemper IGCC, recovery of costs associated with the Kemper IGCC, and bonus depreciation tax benefits. Mississippi Power Company 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 Company; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Mississippi Power Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory changes, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries; available sources and costs of fuels; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms; ability to control costs and avoid cost overruns during the development and construction of facilities, which includes the development and construction of generating facilities with designs that have not been finalized or previously constructed, including those risks identified above that have caused and may continue to cause cost increases and/or extensions of the in-service date; ability to construct facilities in accordance with the requirements of permits and licenses and to satisfy any operational and environmental performance standards, including any Mississippi Public Service Commission (“PSC”) requirements and the requirements of tax credits and other incentives; advances in technology; actions related to cost recovery for the Kemper County integrated coal gasification combined cycle facility (“Kemper IGCC”), including actions relating to proposed securitization, Mississippi PSC approval of Mississippi Power Company’s proposed rate recovery plan, as ultimately amended, which currently includes the ability to complete the proposed sale of an interest in the Kemper IGCC to South Mississippi Electric Power Association, the ability to utilize bonus depreciation, which currently requires that the related assets be placed in service in 2014, and satisfaction of requirements to utilize investment tax credits and grants; Mississippi PSC review of the prudence of Kemper IGCC costs; the outcome of any legal or regulatory proceedings regarding the Mississippi PSC’s issuance of the Certificate of Public Convenience and Necessity for the Kemper IGCC, the settlement agreement between Mississippi Power Company and the Mississippi PSC, the March 2013 rate order, or the State of Mississippi legislation designed to enhance the Mississippi PSC’s authority to facilitate development and construction of baseload generation in the State of Mississippi; and the ability of counterparties of Mississippi Power Company to make payments as and when due and to perform as required. Mississippi Power Company expressly disclaims any obligation to update any forward-looking information.