Southern boosts cost, delays Mississippi Kemper coal plant start

Wed Oct 30, 2013 11:07am EDT

Oct 30 (Reuters) - U.S. power company Southern Co delayed the planned start-up date of its 582-megawatt Kemper coal-fired power plant in Mississippi to the fourth quarter of 2014 and boosted the estimated cost of the project again, to $4.02 billion.

Southern said in a federal filing late on Tuesday that its Mississippi Power unit had revised the start-up date due to "lower-than-planned installation levels for piping as well as abnormally wet weather."

Kemper will use a new type of integrated gasification combined cycle (IGCC) technology to turn lignite coal into synthetic natural gas.

The plant will also capture at least 65 percent of the carbon dioxide it produces as a byproduct. The carbon dioxide will be piped to an oilfield and used in oil production.

Only a couple of other IGCC plants are in service in the United States - in Indiana and Florida. Those plants do not capture carbon dioxide emissions.

The U.S. Environmental Protection Agency, as part of a proposal to limit carbon emissions from new power plants, has pointed to Kemper as an example of how new coal-fired plants can be built with capture-carbon and storage systems.

Earlier this month, Southern said it had revised the plant's start-up from May 2014 to "later in 2014." In July it boosted the cost estimate for Kemper to $3.87 billion. Construction of the plant started in 2010.

Reuters has estimated the project's total cost will climb to about $5 billion when federal grants, the cost of the coal mine, the carbon dioxide pipeline system and other items are included.

Despite the cost overruns, Southern said on Tuesday that Mississippi Power does not intend to seek any joint owner contributions or rate recovery for any costs related to the construction of Kemper that exceed the state's $2.88 billion cost cap.

Southern said it and Mississippi Power recorded a pre-tax charge of $150 million ($93 million after tax) related to Kemper in the third quarter, in addition to charges totaling $990 million ($611 million after tax) recognized previously.

Southern also warned that "Mississippi Power could experience further schedule extensions and/or construction cost increases with respect to Kemper."

"To the extent it becomes probable that additional costs will not be recoverable, Southern and Mississippi Power will have additional charges to income, and such charges could be material," the company said.

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