Southern Co's coal unit delayed, forfeits tax benefit

Reuters

HOUSTON, Oct 2 (Reuters) - Southern Co's $5 billionproject to build one of the first coal-fired power plants thatcaptures carbon dioxide emissions will be delayed beyond May andso will miss out on $133 million in tax incentives, the companysaid in a filing.

Rainy weather in the summer and low labor productivity willdelay completion of the plant in Kemper County, Mississippi,until later in the year, Southern said on Wednesday, despiteraising the project's budget in July to meet the May deadline.

Southern's smallest utility unit, Mississippi Power, isbuilding the 582-megawatt integrated gasification combined-cycle(IGCC) plant near oil fields, meaning it can capture and injectunderground the majority of carbon dioxide it emits to increaseoil field production.

The plant's unique location, however, led Southern lastmonth to caution regulators not to use it as a standard forfuture coal-fired plants.

"The expected extension of the schedule beyond May 2014reflects Southern Company's and Mississippi Power's currentanalysis of the time needed to complete the construction andstart-up activities of the Kemper IGCC," the companies said in afiling with the Securities and Exchange Commission.

The delay means Mississippi Power will not be eligible for$133 million in investment tax credits and potential future taxcredits.

COST OVERRUNS

A revised construction schedule and any resulting changes tocost will be detailed later this month, Southern said.

Cost overruns have increased the plant's price tag twicethis year to nearly $5 billion, more than twice the initialestimate. As a consequence, two executives involved with theproject have been replaced.

Southern can recover $3.8 billion in related costs fromMississippi Power's 185,000 customers. It said it anticipates nochange to customer rates proposed under a plan approved earlierthis year by the Mississippi Public Service Commission.

In July, Southern increased the project's budget by $450million to keep it on schedule. Before that, it raised thebudget by $540 million for additional piping systems critical totransfer fuel from the coal gasifier to the turbines thatproduce electricity.

In early August, Mississippi Power began testing the plant'sauxiliary boiler which will turn water into steam. In lateAugust and early September, workers began test-firing the combustion turbines.

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