By JACK WEATHERLY
Moody’s Investors Service, a leading credit rating firm, has downgraded $800 million of Mississippi Power Co.’s debt securities because of continuing problems with the utility’s coal-gasification power plant in Kemper County.
The downgrade means that future credit for the power company, which has about 186,000 customers in the state, stands to be more expensive.
Moody’s lowered the senior unsecured debt to non-investment grade from lower medium grade.
The cost of building the power plant, which is to use the “syngas,” made from lignite, a low-grade coal in what the company says it has a 40-year supply near the site, to run the turbines that produce electricity, has risen $7 billion, from its original $2.9 billion projection.
The project has “severely stressed the utility’s financial profile,” Moody’s said in a r elease recently.
“The [integrated gasification combined cycle] plant may not be economic to operate at all,” the report said.
Mississippi Power started running the “clean-coal” plant on natural gas in August 2014 while awaiting completion of the gasification components.
Two years later, Tom Fanning, chief executive and chairman of the parent Southern Co., described in a teleconference the plant as a “dual fuel investment.”
Even if the original projected cost of building the 585-megawatt facility had been realized, it would have been two and one-half times the cost of constructing a 620-megawatt, natural-gas-fired plant for $917 million in 2013, according to the U.S. Energy Information Administration.
The Moody’s report notes that on Feb. 22 Mississippi Power said in an analysis filed with the Mississippi Public Service Commission “the plant to be less economic than a natural gas” operation.
“This is in sharp contrast to the last four analyses submitted by the utility between 2012 and 2015” that showed the opposite.
Mississippi Power is required to file a rate case on the Kemper plant by June 3 “and expects a negotiated settlement agreement,” Moody’s said.
The Mississippi Public Service Commission is in a “difficult position” of approving a rate recovery and return on an overly expensive plant serving “a demographically below average service area,” Moody’s reported.