Rising costs and construction issues at a next-generation “clean coal” plant in Mississippi continue to hold down Southern Co. profits.
The mild, rainy summer didn’t help by suppressing electricity demand, company executives said.
The Atlanta-based energy giant reported a third-quarter profit of $852 million, or 97 cents a share, down from $976 million, or $1.11 a share, during the same time a year ago. The result included a $93 million charge from increased cost estimates for the Plant Ratcliffe Kemper County energy facility, owned by Southern’s Mississippi Power unit.
Without that charge, the company’s profits would be $945 million, the company said early Wednesday.
“Outside of the weather, the company is performing beautifully,” said Thomas Fanning, Southern Company chairman, president and chief executive officer, in an interview with the Atlanta Journal-Constitution.
Southern executives have touted Kemper’s proprietary technology that will capture carbon while the coal is burned and inject it underground. But the project, started in 2010, has suffered cost increases and delays for a variety of reasons.
The success of carbon-capture technology is critical as the U.S. Environmental Protection Agency has proposed tough requirements to limit carbon pollution from new power plants. Similar measures are expected for existing coal plants.
“The standards we believe the EPA is setting right now most likely will eliminate coal from the generation portfolio in the future,” Fanning said.
Fanning said he believes the technology at Kemper “has great promise in the future,” and said other countries, including China, Pakistan and Indonesia are interested in using it.
Construction challenges previously led Southern to install a new president at Mississippi Power and warn of a possible credit downgrade. The project now is scheduled to start producing electricity toward the end of 2014 instead of in the spring, the company said.
Missing the target date will cost Southern $133 million in federal tax credits.
For the third quarter in a row, Southern warned investors before its earnings announcement that they would include a charge related to Kemper. The company also said in a regulatory filing that the cost of the whole project would increase to $4.02 billion.
Previous charges from the project have totaled $990 million, or $611 million after taxes, the company said in the filing.
“It’s disappointing,” said Paul Patterson, an analyst with Glenrock Associates. “It’s somewhat surprising. We’ll have to see what their plan is, so to speak.”
Cost increases and scheduling delays could continue, Southern warned. The amount Mississippi Power can recoup from consumers is capped at $2.88 billion under a settlement with state utility regulators.
“To the extent it becomes probable that additional costs will not be recoverable, Southern Company and Mississippi Power will have additional charges to income, and such charges could be material,” the filing said.