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By Russell Gold • Updated Feb. 22, 2017 4:56 p.m. ET
Company reports sharp drop in profit
Thomas Fanning, CEO of Southern Co. Photo: Chris Goodney/Bloomberg News
Southern Co. said it has nearly completed a first-of-its-kind “clean coal” power plant, though a new analysis suggests it might not make sense to burn coal in it.
After taking nearly seven years and $7.1 billion to build, the Kemper County, Miss., facility, which can burn coal and capture much of the carbon-dioxide output, should be fully operational by the middle of next month, the company said.
But a required economic analysis of the project, the most expensive fossil-fuel power plant ever built in the U.S., found that lower natural gas prices and higher-than-expected operating costs “negatively impact the economic viability” of the facility.
The company analysis, disclosed this week, concludes that only if natural gas prices are high would the economics of the clean-coal plant compare favorably to a gas-burning plant. The Kemper facility was initially forecast to cost $3 billion in 2010.
Southern updated the status of the troubled plant as it posted a sharp decline in profit in the final quarter of 2016 to $197 million, or 20 cents a share, down from $271 million, or 30 cents, a year prior. It said its earnings were helped by retail revenue at its traditional electric operating companies and weather-related revenue impacts, but offset by higher operations and maintenance costs, increased share issuances and lower customer usage.
The company declined to specify the gas price assumptions it used in its scenario for the Kemper plant’s viability, but said on a conference call with investors Wednesday that the scenario included a price above $5 per million British thermal units in 2020 and trending upward.
By comparison, the U.S. Energy Information Administration’s forecast doesn’t anticipate gas prices to top $5 until 2030.