Kemper Project faces $60 million cost increase and another delay

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By Steve Wilson  /   April 27, 2016  / www.mississippiwatchdog.org

Mississippi Power announced Tuesday in an SEC filing that the Kemper Project clean coal power plant will cost an additional $60 million and could be delayed even further.

The total estimated cost of the plant now stands at $6.72 billion and its online date will be pushed back to

Photo by Mississippi Power OVERHEAD VIEW: The estimated cost of the Kemper Project clean coal power plant increased by $51 million in March.

Photo by Mississippi Power
OVERHEAD VIEW: The estimated cost of the Kemper Project clean coal power plant increased by $51 million in March.

September. The company says in the filing that any further delays could add up to $25 million to $35 million per month if the plant is delayed past Sept. 30. The plant has been generating power on natural gas since August 2014.

In its quarterly earnings statement released Wednesday, Mississippi Power’s parent company, the Southern Company, said its first quarter earnings were down $485 million, compared with $508 million in the first quarter of 2015.

Of the new Kemper Project costs, $35 million will be paid by the company and $25 million in interest could be paid by ratepayers in the form of rate increases, if approved by regulators.

The problem for the plant continues to be the two-part refractory coating on the inside of the plant’s two gasifiers, which convert lignite coal mined on site into a natural gas-like substance called synthesis gas. The refractory coating protects the metal shell of the gasifier from contact with the 1,800-degree temperatures inside the vessel, which could cause a breach and a possible explosion.

The company reported in its last filing from its February report to the Mississippi Public Service Commission that it had to conduct repairs and modifications to the refractory lining in the gasifiers and would have to evaluate the need for further repairs or upgrades. The company says in its March report about the refractory that additional costs or design changes are possible.

RELATED: Kemper Project makes for an expensive natural gas plant

The delay isn’t unexpected. During last month’s “work session” meeting by the PSC, the independent monitoring firm hired by the PSC said the plant, which is in the startup and commissioning phase of construction, was 87 percent complete as of March 13. AECOM monitors said during the meeting that progress averaged about 1 percent per month over the past few months, a measure that would have to improve for the company to meet its start date of third quarter of this year.

RELATED: Monitor: Kemper Project might not make its start date

If that pattern holds, that would put Kemper online in April 2017. If the company’s estimates of up to $35 million in extra costs per month for every month the plant is delayed are correct, delay-related costs could add $280 million to the plant’s final tab.

Southern Company has to file monthly progress reports with the PSC, and the March report marked the eighth consecutive month with a cost increase. The plant was originally supposed to open in May 2014 and will be more than two years behind schedule when it comes online.

The company cannot seek further rate increases to generate revenue beyond a $2.88 billion cap that was part of an agreement reached with the PSC to limit the passing-on of costs to the utility’s 187,000 customers in south Mississippi.

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