Electric utility holding firm Southern Company’s SO subsidiary, Mississippi Power, recently reported that the second gasifier at its Kemper County energy facility has started producing syngas using lignite. The Kemper plant produced its first syngas in mid-July. With the start of the production on its second gasifier now, the facility is moving closer toward full operation.
Southern Company’ssubsidiary built the Kemper County facility to use coal to produce electricity. The plant creates syngas by turning lignite coal mined from that region into gas. The syngas, which is used in the same way as natural gas, produces electricity through a series of combustion turbines.
The cost of the Kemper facility, originally expected to be $2.4 billion, is now $6.7 billion. The lignite plant is expected to be fully operational by the end of October. Once fully functional, the plant is expected to not only help in generating electricity, but also to capture marketable products from syngas like carbon dioxide, which in turn will help in enhanced oil recovery.
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Southern Company is one of the largest and best-managed electric utility holding companies in the U.S. The firm dominates the power business across the southeastern region. With good rate base growth and constructive regulation, we expect the firm to generate steady earnings and dividend growth in the coming years through its long-term power contracts. However, the challenging economic environment and delays associated with existing construction projects may hamper Southern Company's results in the next few quarters.
Currently, the utility carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Some better-ranked players in the same sector include DTE Energy Company DTE, Companhia Energética de Minas Gerais S.A. CIG and Duke Energy Corporation DUK. All these stocks carry a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
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