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Completion of the power plant in Kemper County was more than three years behind schedule.

Southern Co. chief calls Kemper plant ‘dual fuel investment’

By JACK WEATHERLY

Tom Fanning, chief executive and chairman of the Southern Co., described in a teleconference with analysts last week Mississippi Power Co.’s Kemper County clean-coal power plant as “a dual fuel investment,” relying also on natural gas as needed.

Fanning in the past has downplayed the long-term importance of natural gas despite having run the plant on it for two years, awaiting the commercial startup with its synthetic gas derived from lignite, a soft, low-energy coal in what the company says is a nearby 40-year supply. Southern is parent of Mississippi Power, which has 186,000 customers in the state.

There have been “dribs and drabs” of extra costs, including for improvements, Fanning said during the teleconference, a transcript of which was provided by Thomson Reuters.

“And one of the improvements that we have made is the capability to deliver a dual fuel investment here.”

Asked by the Mississippi Business Journal how much the duality improvement has cost, Mississippi Power had no immediate reply.

Southern sustained a $38 million loss on the Kemper project in the second quarter, compared with a loss of $23 million a year earlier.

The project is more than two and one-half years behind schedule and its current cost of construction, $6.8 billion, is nearly three times the original estimate.

Southern reported second-quarter earnings of $638 million, or 68 cents per share, compared with $629 million, or 69 cents a share, in the second quarter of 2015.

Mississippi Power reported $277 million in revenues and $29 million in pretax earnings compared with $275 million and $49 million a year earlier.

Mississippi Power said in an email on Tuesday that “this plant was always designed to be an Integrated Gasification Combined Cycle plant, almost exclusively intended to run on lower-cost syngas. It is not our intention to switch between fuel sources on a regular basis.

“The Kemper project achieved its most significant milestone to date on July 14, having successfully converted coal to gas, or syngas, in the first of two of the project’s gasifiers.

“The successful production of syngas proves that Kemper’s technology can provide a way forward for coal and is an important step in the extensive process of achieving full commercial operation.”

The company says that it plans to commence commercial operation by the end of September.

If the plant were to rely heavily on natural gas – supplies of which are expected to be plentiful and thus prices low – the project, in terms of development cost, would hardly be a bargain for customers and investors.

Even if the original projected cost of building the 585-megawatt had been realized, it would have been two and one-half times the cost of constructing a comparable 620-megawatt natural-gas-fired plant for $917 million in 2013, according to the U.S. Energy Information Administration.

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