Escalating costs at a new power plant in Mississippi cut into Atlanta-based Southern Co.’s first-quarter profits, the utility company reported Wednesday.
Southern earned $81 million, or 9 cents a share, during the first quarter, versus $368 million, or 42 cents a share, during the same period a year ago.
Cost increases at Plant Ratcliffe in Kemper County, Miss., reduced Southern’s quarterly earnings by $333 million. Another one-time charge lowered profits by an additional $16 million.
Without those items, Southern’s earnings would have been $430 million, or .49 cents a share.
Southern’s Mississippi utility, Mississippi Power, is building a new-generation power plant that converts coal to natural gas. The company said in a filing Tuesday that the cost of the project has increased 19 percent to $3.42 billion. The amount of money Mississippi Power can recoup from consumers is capped at $2.88 billion because of a settlement the company reached with state utility regulators.
It is unusual for a regulated utility to absorb costs of building a power plant. In a conference call with Southern executives, analysts asked if they should brace for more increases.
“Look, this Kemper situation is something that we’re disappointed in,” said Tom Fanning, Southern’s chairman, president and chief executive officer. “This is not representative of the kind of performance Southern delivers year in and year out. This is unusual performance for us and is something we’re going to work very hard on not to repeat.”
Company executives said the one-time earnings drop would not impact the company’s long-term financial outlook. The company’s shares fell 1.27 percent to $48.03 Wednesday.
Southern’s decision to absorb some of Plant Ratcliffe’s cost overruns comes one month after the company announced $740 million in cost increases at Georgia Power’s Plant Vogtle nuclear expansion project. Consumer advocates fear that Georgia Power customers eventually will pay for Vogtle’s cost increases.
Fanning warned against making any connection between Mississippi Power’s decision and what Georgia Power could do.
“Vogtle is completely different than Kemper,” Fanning said. Vogtle’s cost increases are tied to scheduling delays, while Kemper’s increases are because Mississippi Power underestimated the amount of piping needed, he said.
While other vendors designed and are building Plant Vogtle, Mississippi Power designed and is building the Kemper project itself.
“I know people will try and link those, but they are not at all even similar,” Fanning said.
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