Kemper ups budget again for timely completion

SOUTHERN Company officials have told investors it will need to increase its budget by another $450 million to keep the development of the Kemper coal gasification facility in Mississippi on schedule for its start next May.

Donna Schmidt

In its second quarter earnings report and subsequent conference call, Southern discussed Kemper’s progress and confirmed it would need the additional funds to finish Mississippi Power’s 582-megawatt integrated gasification combined-cycle plan, bringing its price tag to about $5 billion.

Initial cost estimates for Kemper were about $2.4 billion.

“Despite recent cost challenges, we are making great progress in the construction of the Kemper County energy facility,” chairman, president and CEO Thomas Fanning said in the call.

“The company's investment in this innovative technology will help provide decades of clean, safe, reliable and affordable electricity to Mississippi Power customers.”

He noted Mississippi Power's analysis of costs would continue throughout construction, and that the additional $450 million was necessary to stay within key milestones including $100 million for contingencies.

A prior increase in costs of $160 million in July was tied to material costs such as piping, and a $540 rise in costs in April was needed in part to cover more crew members for construction.

Fanning told investors that he could not rule out additional cost increases for Kemper, but called the most recent review of the project’s finances “very, very thorough”

Southern’s Mississippi Power subsidiary is planning to test fire the facility’s combustion turbine later this month and align its steam turbine to the electric grid in October.

It is aiming to heat up the first gasifier by the end of the year ahead of next May’s final deadline.

Northern District commissioner Brandon Presley, an opponent of the project, called the growing costs “very disturbing” during an interview last month.

“Not once have we received good news that things are coming in under budget,” he said.

According to Reuters, it appeared Southern made the announcement via the filing to fulfill a promise of transparency, as it had previously been accused of hiding overruns for Kemper.

Two top executives at Southern's Mississippi Power unit were replaced earlier this year after questions rose about potential withheld information.

Kemper is one of only two recent IGCC projects in the US. The other is Duke Energy’s 618MW Edwardsport plant in Indiana, completed in June, about a year behind schedule.

Its costs were $3.5 billion, 75% higher than initial estimates. That facility does not capture emissions.

Southern received a $250 million grant last year from the US Department of Energy for Kemper’s development.

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