Moody's to Mississippi Power: Stop the bleeding at Kemper coal
October 2, 2015
By William Pentland Mississippi Power said it would repay $234 million in federal tax credits due to delays at the coal gasification plant under construction in Kemper County in eastern Mississippi.
The Kemper plant, which is slated to become the first large-scale coal gasification generator in the United States, has suffered a series of delays and cost overruns. It is now expected to cost $6.3 billion, almost three times original estimates. The project's cost increases by at least $25 million for every additional month construction is delayed. The utility, a subsidiary of the Atlanta-based utility holding company Southern Company, can only claim the federal tax credits if Kemper starts producing carbon dioxide by April 19, 2016. On Tuesday, Mississippi Power said it probably would not meet that deadline. Last year, the company had to repay $133 million in tax credits to the federal government after it missed the original May 2014 deadline to put the plant into operation. Unlike the first round of tax credits lost, Mississippi Power said it would likely seek to recover the $234 million in lost tax credits from its customers unless it is able to identify an alternative vehicle for avoiding the tax liability. The utility will borrow money from Southern Company to repay the tax credits. However, due to accounting rules, Southern Company will not ultimately pay for the lost tax credits itself, according to Ed Holland, the chief executive officer of Mississippi Power. The Kemper plant began generating electricity by burning natural gas last year. However, the plant's most critical parts, which are designed to gasify lignite coal for fuel and then separate out carbon dioxide from the plant's exhaust, have not yet been completed. The carbon dioxide captured from the plant's exhaust is supposed to be sold to companies that would use it for oil extraction. In August, the Mississippi Public Service Commission (MPSC) approved an emergency 18 percent rate increase -- which will add up to about $159 million a year to customer bills. Despite this temporary rate relief, Moody's Investor Service downgraded Mississippi Power's credit rating, saying the utility needed to develop a "permanent cost recovery" solution to cover the run-away construction costs at the Kemper clean coal plant. The MPSC said it would hold hearings in November to determine whether to make the rate increases permanent with a final order to be issued by early December. For more: © 2015 FierceMarkets, a division of Questex, LLC. All rights reserved. http://www.fierceenergy.com/story/moodys-mississippi-power-stop-bleeding-kemper-coal/2015-10-02 |