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Kemper

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Company asks Court to consider best interest of customers

The Kemper County energy facility.
The Kemper County energy facility.

Today Mississippi Power filed an application with the Mississippi Supreme Court asking the Court to grant a rehearing on its ruling last month regarding the state Public Service Commission’s rate case for the Kemper County energy facility.

“Because the Court action will result in higher rates and bills to customers, Mississippi Power is asking the Court to reconsider its decision,” Mississippi Power President and CEO Ed Holland said. “The company is committed to ensuring our customers are not hurt by this decision and that we do what is in their best interest.”

In the filing, Mississippi Power asserts:

    •The PSC appropriately used its authority under the Mississippi Public Utility Act to establish fair and reasonable rates for Kemper, which the Court failed to address.

    •The PSC and Legislature hold the authority to set rates, not the Supreme Court, which it has essentially done in its ruling.

    •The company and the PSC complied with Mississippi law and the PSC’s rules concerning public notice of the rate proceedings regarding Kemper.

    •The Court’s decision will require rate increases of 35-40 percent rather than the approximately 24 percent increase anticipated under the rate proposal considered by the PSC.

“If the Supreme Court ruling stands, our customers will see a substantial increase in rates,” Holland said. “We do not believe that was the Court’s intent.”

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Canadian visitors learn about the Kemper project before touring the plant.
Canadian visitors learn about the Kemper project before touring the plant.

A collaboration centered on a cleaner future for coal brought representatives from the Canadian Consulate, the Saskatchewan Provincial Government and representatives of SASKPower to Mississippi Power’s Kemper County energy facility March 10.

Since its commissioning in October, SASKPower has operated the world’s only post-combustion coal-fired carbon-capture power generation facility.

SASK’s Boundary Dam power plant doesn’t gasify coal or capture carbon dioxide before combustion as the Kemper plant will do, but Boundary Dam does represent the world’s first foray into carbon capture for a conventional coal-fired facility.

“We’re actually getting more power out of our facility than the business case called for,” Ian Yeates, SASK vice president said. “We’ve only been up and running since October 2014, so we were a little late, but it’s going well. I would fully expect the Kemper plant to need at least 12 to 18 months to tune the plant, make sure everything is running properly and deal with unexpected issues. It’s inevitable for a plant of this nature, but I also have no doubt it’s going to work properly.”

In addition to touring the Kemper plant, the delegation visited facilities in Mississippi involved in enhanced oil recovery where captured carbon dioxide from the Kemper County energy facility will be used for even more energy production.

Delegates said Saskatchewan derives about 44 percent of its electricity from coal, which is the province’s most abundant and cheapest energy source.

“I’ve represented Saskatchewan on the energy council for several years, and I’ve always heard about Kemper,” Fred Bradshaw, a member of Saskatchewan’s Legislative Assembly said. “We’ve got a large supply of coal in the world, and we’re going to have to have power. If we’re going to move the world forward we have to have coal in the mix, and it’ll have to be in the mix for a number of years. Given the way our respective federal governments are putting more regulations on carbon emissions, projects like these have to be initiated.”

The tour, sponsored by Southern Company and the Mississippi Energy Institute, followed a visit to SASKPower’s Boundary Dam project which opened last fall. In addition to Kemper, the delegation will attend a carbon capture conference in Atlanta before visiting Southern Company’s carbon capture and gasification research facilities near Birmingham.

The Kemper project will capture carbon dioxide pre-combustion – during the process of turning lignite coal into synthesis gas. That gas will then be used to generate power.

Captured carbon dioxide in both projects is expected to boost oil production through enhanced oil recovery. Mississippi Power has contracts in place to sell captured carbon dioxide to oil companies in the state which are expected increase Mississippi oil output by two million barrels a year.

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Kemper aerial
An aerial photo of the Kemper County energy facility taken in Feb. 2015.

Mississippi Power’s Kemper County energy facility reached one of its most significant milestones to date when it successfully performed the “first fire” and associated activities of the project’s gasifiers last week. The gasifiers – the centerpiece of the project – are designed to convert lignite coal to synthesis gas, or syngas, for use in power generation.

The burners for both of the project’s gasifiers functioned as predicted in their first test, completing another important step toward finishing the project, which is expected in the first half of 2016.

“The Kemper County energy facility will be capable of powering thousands of homes and businesses with electricity derived from an underutilized and affordable Mississippi resource,” said Mississippi Power President and CEO Ed Holland. “The full operation of Kemper will represent more than the final milestone for this project. I believe it will be a transformational moment in the history of energy production.”

The gasifiers will transform lignite mined adjacent to the plant into syngas, which will fuel the plant’s turbines to generate clean, safe, reliable and affordable electricity.

“It’s like sticking a lighter out a moving car’s window, lighting it, and then keeping it lit,” said Joe Miller, Kemper startup manager, in describing the complexity of igniting the project’s startup pilot burners. “It is exciting to see more than 20 years of engineering and testing now taking shape at this first-of-its-kind facility.”

Another major milestone is expected to be achieved with the production of syngas when lignite is added to the gasifier later this year.

The facility’s innovative technology is designed to capture 65 percent of carbon dioxide emissions, which could be repurposed for use in enhanced oil recovery.

Approximately 2,500 workers continue to work on the plant. The entire project is slated to begin operation in 2016.

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 has been recognized throughout the utility industry for excellence in storm restoration and recovery efforts and as a leader in safety. Visit our websites at mississippipower.com and mississippipowernews.com, like us on Facebook, follow us on Twitter, LinkedIn, Google+ and YouTube.

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 schedule for the completion of construction and start-up of the integrated coal gasification combined cycle project in Kemper County, Mississippi (the “Kemper IGCC”) and its expected benefits and future generating capacity.  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 (the “Mississippi 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 actions relating to proposed securitization, Mississippi PSC approval of a rate recovery plan, including 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 assets be placed in service in 2015, and satisfaction of requirements to utilize investment tax credits and grants; Mississippi PSC review of the prudence of Kemper IGCC costs; the ultimate outcome and impact of the February 2015 decision of the Mississippi Supreme Court and any further legal or regulatory proceedings regarding any settlement agreement between Mississippi Power and the Mississippi PSC, the March 2013 rate order regarding retail rate increases, 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 to make payments as and when due and to perform as required. Mississippi Power expressly disclaims any obligation to update any forward-looking information.

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Mississippi Power's Kemper County energy facility
Mississippi Power’s Kemper County energy facility

Mississippi Power has revised the Kemper County energy facility cost estimate by an additional $70 million pre-tax estimated probable loss for the fourth quarter of 2014.

The revised estimate was included in the December 2014 monthly status report filed with the state Public Service Commission and a Form 8-K filed with the U.S. Securities and Exchange Commission.

The revised estimate is due to costs related to operational readiness, start-up activities, fuel, completion of construction and construction support costs during start-up and the price of fuel.

“Mississippi Power is committed to the success of Kemper for the long-term benefit of its customers as well as for the benefit of the communities where we will operate,” Mississippi Power President and CEO Ed Holland said, adding that there are already more than 300 permanent employees located in the Kemper area, directly impacting the local economy, jobs growth and community efforts.

Customers will not pay anything above the limit agreed to by regulators.

The next major milestone for the facility is expected to be the first gasifier heat-up, currently scheduled for the spring of this year.

Cautionary Note Regarding Forward-Looking Statements
Certain information contained herein 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 estimated cost and schedule for project milestones and the completion of construction and start-up of the Kemper County integrated gasification combined cycle project (the “Kemper IGCC”) and impacts on customer rates. 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: changes in tax and other laws and regulations to which Mississippi Power Company is subject as well as changes in application of existing laws and regulations; 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 factors, 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, delays associated with 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”)); 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 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 assets be placed in service in 2015, 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 any settlement agreement between Mississippi Power Company and the Mississippi PSC, the March 2013 rate order approving retail rate increases consistent with the terms of the settlement agreement, 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.

APEC members learn about the innovative technology of the Kemper County energy facility
APEC members learn about the innovative technology of the Kemper County energy facility

The promise of dramatically reducing carbon emissions and using the world’s most abundant type of coal for more energy production brought another group of international visitors to Kemper County.

Members of the Asia Pacific Economic Cooperation spent two days in east Mississippi to tour Mississippi Power’s Kemper County energy facility and hold a series of workshops primarily focused on Southern Company and Mississippi Power’s innovative carbon capture technology which is poised to be applied commercially next year when the Kemper County energy facility begins commercial operation.

“This technology can be very important for improving the environment in China,” said Pang Guanglian, secretary general and senior economist for the China Petroleum and Chemical Industry Federation.

Pang said China faces significant air quality challenges, particularly in Beijing. Guanglian was one of about 40 participants in the tour at Kemper. Along with China, the tour included representatives from the United States, Mexico, Japan and a host of Pacific Rim nations interested in not only Southern Company’s innovative carbon capture technology, but also its patented gasification process. The process – transport integrated gasification or TRIG – is the first in the world capable of turning low-grade, high-moisture coal into power, and use captured carbon for enhanced oil recovery.

“Many of these economies are seeing a decline in their oil production and some of these economies depend heavily on revenue from oil production, and the purpose of these meetings is both carbon management and energy security,” said Craig Hart, associate professor at Renmin University in China.

“China is both a producer and consumer of technology,” Hart continued. “So the ability to use, buy or partner with regard to technology would, for them, be a boon but also be beneficial for U.S. companies to be profitable and helpful to the broader societal goals in the long term.”

Despite the diversity of language and background, APEC Kemper workshop participants were linked by the common belief that technology can address the environmental challenges facing the globe, and ensure that readily available fuel sources, like lignite coal, can be used cleanly, responsibly and affordably.

Pamela Tomski, of the Global Carbon Capture and Storage Institute based in Australia said even on her third trip to Kemper, the facility continues to impress.

“It’s amazing,” Tomski declared. “It’s an engineering beauty. Everyone is looking at the Kemper plant. Mississippi has an opportunity to be showcased on the global stage. The whole world sees it as a first of its kind facility that’s going to set an example for the rest of the world on how to burn coal more cleanly and without CO2 emissions.”

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Kemper-July-14

Mississippi Power’s monthly Kemper County energy facility status report with the state Public Service Commission includes an additional $418 million pre-tax estimated probable loss for the third quarter of 2014 and an extension of the plant’s expected in-service date to the first half of 2016.

As previously announced, the company has been reviewing the schedule for the remainder of the project, including the gasifier and gas clean up facilities. Additional time is required for start-up activities and operational readiness, including enhancing the scope of specialized operator training.

“While it will take longer to complete the project, and the capital costs are higher than expected, Mississippi Power still believes in the team that is responsible for constructing and starting up the plant, along with the operations team currently running the combined cycle and training personnel for full operation of the gasification facility,” CEO Ed Holland said.

“These teams are working hard to bring this plant safely online for the benefit of Mississippi Power customers for decades to come,” he added.

Major construction on the project is “essentially complete” and the combined cycle portion of the plant has been in service since early August. The plant has been running at a capacity factor of 80 percent and has a reliability rate four times better than the industry average for combined cycles, Holland said.

The company continues to be committed to the long-term success of the project and the implications it has for coal use around the world. Last month, the top climate technology official for the United Nations toured the plant and said the project “gives hope” to developing countries.

Certain information contained herein 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 cost and schedule for completion of the Kemper County energy facility.
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 Form 10-K for the fiscal 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; ability to control costs and avoid cost overruns during the development and construction of facilities; ability to construct facilities in accordance with the requirements of permits and licenses to satisfy any
operational and environmental performance standards and to integrate facilities into the Southern Company system upon completion of construction; advances in technology; actions related to cost recovery for the Kemper County energy facility and satisfaction of requirements to utilize investment tax credits and grants; Mississippi PSC review of the prudence of the Kemper County energy facility costs; the outcome of any legal or regulatory proceedings regarding any settlement agreement between Mississippi Power 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 to make payments as and when due and to perform as required. Mississippi Power expressly disclaims any obligation to update any forward-looking information.

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kemper aerial
An aerial photo of the Kemper Co. energy facility.

Mississippi Power today filed its monthly Kemper County energy facility project status report with the Mississippi Public Service Commission outlining construction milestones and costs.

The filing identified additional estimated costs subject to the cost cap in the aggregate amount of approximately $88 million including $29 million previously reported in the July PSC report and $59 million reported in the August report.

The estimated cost increases reported in August are due primarily to construction, start-up and operational readiness activities, as well as additional property taxes and insurance. The report also noted the company expects the Kemper IGCC will be placed in service later during 2015 than the previously scheduled in-service date of the second quarter 2015.

“Mississippi Power and Southern Company remain committed to this project. Our investment in integrated coal gasification and the Kemper project – and our belief that this technology represents the future of coal in energy production – has not changed,” said Mississippi Power CEO Ed Holland.
Mississippi Power customers will not pay a penny of cost above the limit agreed to by regulators and legislators.

This latest report also outlined significant milestones achieved at the Kemper facility, including placing the combined cycle into service this summer to help serve customers’ energy needs during peak summer season.

Additional information about the Kemper County energy facility is available at mississippipower.com.

Certain information contained herein 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. 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 Form 10-K for the fiscal 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 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 factors, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under construction or other agreements, operational performance, operational readiness, including specialized operator training, unforeseen engineering or design problems, delays associated with start-up activities (including major equipment failure and system integration), and/or operations; ability to construct facilities in accordance with the requirements of permits and licenses 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, 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 actions relating to proposed securitization, Mississippi PSC approval of Mississippi Power’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 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 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 to make payments as and when due and to perform as required. Mississippi Power expressly disclaims any obligation to update any forward-looking information.

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Kemper Leadership
The Leadership Kemper class of 2014 graduated on June 10. Front row, left to right are Leah Holliday, Brenda Pickens, Carolyn Carroll, Tammy Rigdon, Carolyn Palmer: back row; Craig Hitt, Mindy Aust, Annie Brown, Sissy McKee, Annette Taylor, Totsettia Kirk, Faye Wilson, Grace Gibson, Paul Gigandet and Joy Saucier. (Photo courtesy of Kemper Co. Messenger)

When Joy Saucier, Mississippi Power community development representative, began facilitating the Leadership Kemper program in 2010, the plan was to one day pass the baton to local leaders to manage the future of the course.

With the graduation of the fourth class in 2014, her mission is accomplished.

“The highlight of this year’s class is that the Kemper County Economic Development Authority (EDA) is assuming leadership of this development program,” Saucier said. “That is a testament to the leadership capacity we are helping to grow in Kemper County.”

The 2014 class of Leadership Kemper featured 15 graduates who live or work in Kemper County. They dedicated one day per month for the past eight months to focus on leadership skills.

For their community project, the class installed lighting at the stage area of the Barney Brown Senior Citizens Center.

Community members, made up of recent graduates of the program, served on the steering committee and planned each monthly session.

“The citizens of Kemper County have really embraced this program,” Saucier added. “The EDA coordinates logistics and provides general oversight while I assist with leadership skill building at the request of the steering committee. It’s all aimed at better equipping Kemper residents and helping the county move forward.”

Craig Hitt, Executive Director of Kemper Co. EDA, called the program “a very positive opportunity for our community.”

Hitt continued, “We are grateful to Joy and Mississippi Power for their support in getting this program started. We look forward to continuing our partnership each year as we offer leadership training to the citizens of Kemper County.”

The Montgomery Institute in Meridian also led sessions of this year’s program.

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Tripp Ward (left) and Emmanual Gatling (right), from the Kemper Co. energy facility, drop off a donation to Brian Terry.
Tripp Ward (left) and Emmanual Gatling (right), from the Kemper Co. energy facility, drop off a donation to Brian Terry.

After a tornado swept across central Mississippi in late April, carving out a path of destruction and killing 14 people, employees at the Kemper County energy facility immediately asked how they could help in the recovery process.

At the plant’s May safety meeting a few days later, a hat was passed around and $1,600 was donated.

On May 20, Tripp Ward, chemical products analyst at Kemper and fundraiser organizer, delivered the donation to a pair of employees at the Red Hills plant who lost their homes in Louisville.

“The support from our employees has been unbelievable,” Ward said. “This is just another example of how supportive this team is of their community in a time of need.”

At the entrance gates to the plant, several security guards that live in Louisville, which took a direct hit from the tornado, organized another collection.

“Captain Robert Smith had the idea that his security force could show their appreciation and compassion for the tornado victims by donating some needed items,” Drew Hunt, Mississippi Power security coordinator, said.

Employees from Total Protection Services and the plant’s security officers raised more than $400 and used the money to purchase water, food, paper towels and other personal items.

The supplies were delivered to the Louisville relief effort in mid-May.

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