Southern Co.

Kemper IGCC Delays, Cost Surges Are Under SEC Scrutiny

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Southern Co. Kemper IGCC Delays, Cost Surges Are Under SEC Scrutiny

DecisionBriefs | OSIsoft

Southern Co. Kemper IGCC Delays, Cost

Surges Are Under SEC Scrutiny
Video: How Connected Services Fits the
Needs of a Large Scale Energy Storage
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05/09/2016 | Sonal Patel

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UniEnergy Technologies, a clean tech large scale

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The U.S. Securities and Exchange Commission (SEC) is conducting a formal investigation
concerning costs and delays plaguing Mississippi Powers Kemper integrated gasification
combined cycle (IGCC) plant.
Southern Co., Mississippi Powers parent company, revealed the investigation in a recent 10-Q
financial filing
(http://www.sec.gov/Archives/edgar/data/3153/000009212216000144/so_10qx3312016.htm).
The company said that while it is fully cooperating with the SEC, it believes the investigation is
focused primarily on periods subsequent to 2010 and on accounting matters, disclosure

http://www.powermag.com/southern-co-kemper-igcc-delays-cost-surges-are-under-sec-scr... 5/12/2016

Southern Co. Kemper IGCC Delays, Cost Surges Are Under SEC Scrutiny

Page 2 of 6

controls and procedures, and internal controls over financial reporting associated with the
Kemper IGCC. The ultimate outcome of the investigation cannot be determined at this
time; however, it is not expected to have a material impact on the financial statements of
Southern Company, it said.
According to the filing, Southern Co. estimates probable losses from the Kemper IGCC of $53
million in the first quarter of 2016 and $9 million for 2015 stemming from costs it expects to

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incur in excess of the $2.88 billioncost cap established by the Mississippi Public Service

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Commission. Material changes, including unforeseen engineering or design problems and

issues concerning startup activities, at the first-of-its-kind plant may still continue to increase
costs, the company noted.

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Mississippi Powers current total cost estimate for the project is about $6.58 billion, which
includes about $5.35 billion of costs subject to the construction cost cap. Compared to the $2.2
billion originally estimated in 2004, total costs for the projectwhich uses Southern Co.s
proprietary TRIG coal gasification technology and is expected to capture about 65% of carbon

Business Development Manager, GTS Bolttech Mannings, Inc. - North

Versailles, PA
(http://jobs.powermag.com/jobseeker/job/28357558/)

dioxide emissionshave now trebled. In the aggregate, Southern Company has incurred
charges of $2.47 billion ($1.52 billion after tax) as a result of changes in the cost estimate

Communications Intern - Exelon

above the cost cap for the Kemper IGCC through March 31, 2016, the filing says.

Corporation - Chicago, IL

Meanwhile, the utility is also being sued by a handful of local businesses, which allege that the
company violated a Mississippi trade practices law by concealing and falsely representing
important facts concerning the cost and schedule of the Kemper plant. This interfered with

(http://jobs.powermag.com/jobseeker/job/28475121/)
Foreman - Mechanical/Maintenance Exelon Corporation - Wharton, TX
(http://jobs.powermag.com/jobseeker/job/28475115/)

and destroyed business opportunities between the local businesses and current and
prospective business associates, they allege.
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Refractory Rat Holes Delay Operation

The 582-MW plant, under construction in Kemper County, Miss., is now more than two years
behind schedule. The in-service date for the entire facility is now expected in the third quarter

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site_id=2669&referrer=2669)
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site_id=2669)

of 2016 (http://www.powermag.com/kemper-igcc-in-service-date-pushed-to-q3-costs-surgeagain/).
Delays are largely due to a revised schedule for Gasifer A, one of two gasifiers at the plant,
Southern Co. President and CEO Thomas Fanning told investors, according to the transcript of
an April 27 conference call. However, the project is making good progress on modifications
and improvements to the refractory lining of both gasifiers, as well as on addressing issues
identified during the initial fluidization and refractory cure-out on Gasifier A.
Fanning explained that while original fluidization tests went beautifully, the company found
that a lack of seals between the refractory and a set of nozzles (used to blow air into the riser)
allowed material to lodge between the refractory and the hard face and cause what are called
rat holes. It forced the company to tear the refractory off and replace it. What has taken a
lot of time is its a confined space and has just been time intensive. And the more weve
looked around the refractory, we found more of these rat holes, we had to tear more of it off
and put more back on, he said.

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Workers are now in the process of remediating issues with the lignite feed and drying

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systems as we approach testing of the gasifier using lignite. In March, the company
completed refractory cure-out of Gasifier B, reaching full operating temperatures while
successfully operating the gasifier in pre-lignite feed mode. Over the next couple of months,

Most Read
Is EOR a Dead End for Carbon Capture

utilizing Gasifier B, we expect to achieve first syngas production, and later this summer, initial

and Storage?

power production using syngas, Fanning said.

(http://www.powermag.com/is-eor-adead-end-for-carbon-capture/)

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Hundreds of Nuclear Plant Components,

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Southern Co. Kemper IGCC Delays, Cost Surges Are Under SEC Scrutiny

Page 3 of 6

The companys plan is to do the best construction job it can, and then essentially demonstrate

Possible Falsified Documents

a reasonable history of reliable commercial operations, before it files a rate case, he added.

(http://www.powermag.com/arevaadmits-to-irregularities-in-hundreds-of-

I think one of the things that is distinguished by our operation at [the] Mississippi Kemper

nuclear-plant-components-possible-

County plant, sometimes painfully, is that getting it done right the first time is really important

falsified-documents/)

to us. Were not going to rush and try and slam this thing in.

Malaysia Commissions 1-GW

Ultrasupercritical Coal Plant

Fanning lauded workers at the site for demonstrating the plants ability to run on natural gas.

(http://www.powermag.com/malaysia-

It provided, I dont know, 40% of the energy to the customers of Mississippi, and did so in

commissions-1-gw-ultrasupercritical-coalplant/)

an extremely economic way. So as you think about the ability for that plant to provide not only

EPA Motions Court for Weighty Changes

electricity from syngas, but in a dual fuel sort of way to provide a really high level of reliability

to Final Coal Ash Rule

by supplementing any outages or whatever with natural gas-fired electricity, its exceedingly

(http://www.powermag.com/epa-

attractive, and in my opinion, more than meets the obligations were setting forth when this

motions-court-for-weighty-changes-to-

plant was originally ordered.

final-coal-ash-rule/)

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)

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