Southern Co drops one federal loan request, pursues larger one
* Mississippi utility says it can finance coal plant for less
* Georgia unit still wants to finalize DOE nuclear loan terms
HOUSTON, April 1 (Reuters) - Mississippi Power Co, the smallest utility of giant Southern Co, withdrew its request for a $1.5 federal billion loan guarantee for a controversial clean-coal project just days after state regulators approved an agreement giving the utility a new avenue to cover rising costs for the project.
A Southern Co spokesman said Mississippi Power dropped a plan to seek a loan guarantee from the U.S. Department of Energy for its Kemper County coal project in late January after determining it could find lower-cost financing than what it expected the government program to offer.
The withdrawal was prompted by a settlement approved by the Mississippi Public Service Commission (PSC) that allowed the company to pursue legislation to issue up to $1 billion in securitized bonds to recover Kemper costs over and above a $2.8 billion limit set by the state.
Mississippi Power is Southern Co's smallest utility with just 185,000 customers, so the rate impact of the costly Kemper facility is of concern to regulators and consumer groups.
Meanwhile, Southern Co remains "cautiously optimistic" it can negotiate favorable terms to obtain its share of an $8.3 billion DOE loan guarantee for the $15 billion two-reactor expansion at the Vogtle nuclear station in Georgia.
"We are committed to financing options that will serve the best interests of our customers, and we have been pursuing loan guarantees as long as the terms and conditions continue to serve those interests," said Southern Co spokesman Tim Leljedal in an email.
The price tag for the 582-megawatt Kemper County integrated gasification combined-cycle (IGCC) plant, along with the lignite mine and carbon dioxide pipeline has risen from about $2.4 billion when proposed to more than $3.2 billion, according to recent utility filings.
"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," Leljedal said.
"Along with potential proceeds from securitization debt, the project will be fully financed at debt costs well below what was originally contemplated for the project," he said.
Mississippi Power began building the Kemper plant in 2010 despite an ongoing legal challenge to the plant's need certificate issued by the PSC. It faces a May 2014 deadline to begin service to keep certain tax incentives, according to company filings.
The recent regulatory settlement also allowed the Mississippi utility to seek a rate increase previously rejected by the commission. Mississippi Power said the PSC's denial of recovery of early Kemper costs hurt its credit rating.
Mississippi Power said it has so far spent more than $2.6 billion on the Kemper project, one of only two IGCC projects being built in the United States after rising costs, lack of carbon legislation and competition from cheaper gas-fired generation led to cancellation of dozens of clean-coal projects.
"Reducing financing cost is one way to save the customers money on their bill, while being provided reliable energy for the future," said Mississippi PSC Chairman Leonard Bentz.
Southern spokesman Leljedal said the company continues to work to finalize terms of the $8.3 billion "conditional" loan guarantee granted in 2010 to a Southern Co-led consortium building two 1,100-megawatt nuclear units at Vogtle, one of the few new U.S. nuclear projects to move forward in three decades.
Last month, Georgia Power reached a significant milestone, the pouring of 7,000 cubic yards of concrete that will serve as the nuclear units' foundation.
"There continues to be constructive dialogue in the Vogtle 3 and 4 loan guarantee negotiations between the company and the DOE, and we are cautiously optimistic as we work toward the DOE's June deadline," Leljedal said.
The Vogtle loan guarantee was expected to be finalized last year but the process bogged down over terms and costs. Southern said talks were further complicated by DOE requirements added after the much-publicized bankruptcy of solar panel maker Solyndra which had received loan guarantees.
Southern's Chief Executive Tom Fanning has said the company is willing to complete the reactors without federal loan support if necessary.
"I've got to be convinced that whatever terms and conditions we enter into ultimately work to the benefit of our customers," Fanning told Reuters last year. "If they don't, we don't need the loan guarantee."
DOE loans were viewed as critical to revive U.S. nuclear development by helping companies avoid the risk of ballooning costs that accompanied the last round of nuclear construction in the 1980s. However, analysts said the dramatic fall in interest rates since the Vogtle project was announced has lessened the need for government support.
Fanning has highlighted the fact that lower-than-expected financing costs will help offset rising construction on calls with investors.
Last month, Georgia Power told regulators that its 45.7-percent stake in the Vogtle reactors will cost $6.85 billion, up from estimates of $6.4 billion because completion will be delayed by at least one year.
- Malaysia military source says missing jet veered to west |
- Ukraine appeals to West as Crimea turns to Russia |
- Malaysia air probe finds scant evidence of attack: sources |
- UPDATE 1-Missing Malaysian plane last seen at Strait of Malacca-source
- CIA accused of spying on U.S. Senate intelligence committee