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Mississippi Power Co. announced a construction milestone for its Kemper County coal plant Thursday, one day before opponents have another day in court as part of their challenge to it.

A section of the facility’s gasifier – the piece of equipment that will covert lignite coal into the synthesis gas that will be used to produce electricity – has been installed. According to a MPC press release, construction on the project is nearing the halfway point. Commercial operation is scheduled to start in May 2014.

Friday morning in Gulfport, lawyers for the Sierra Club will appear in front of a Harrison County chancellor to argue that the second certificate the Mississippi Public Service Commission issued for the plant is invalid. The environmental group challenged the reissued certificate almost immediately after it was issued in April.

A new certificate for the plant became necessary March 15, when the Mississippi Supreme Court ruled the first certificate did not cite sufficient evidence from the record of proceedings.

The Sierra Club has long opposed the $2.88 billion Kemper facility, calling it an expensive and unnecessary hazard to the environment.

It’s possible that at the conclusion of Friday’s hearing, the presiding judge will issue a ruling. It’s more likely, though, that a written ruling will be handed down a few weeks or a couple months afterward. It’s almost a guarantee that whoever the judge rules against – either MPC or the Sierra Club – will appeal to the state supreme court.

Whenever that court has its say on the matter is when the PSC will again entertain rate increase requests related to the plant. Earlier this summer, commissioners ruled 3-0 to deny a proposed 13 percent rate hike that would have generated about $58 million. Commissioners said then that they would not hear any requests for rate increases until the supreme court had ruled on the pending litigation.

Word started circulating Monday that Mississippi Power Co. had ended its relationship with KBR, a Texas-based engineering and construction design/build firm involved in the Kemper County coal plant.

That’s not the case, a KBR spokesperson told the Mississippi Business Journal Tuesday morning.

Marianne Gooch said KBR is winding down its involvement in the construction phase of the plant, but will still provide engineering and start-up services. The plant is scheduled to begin commercial operation in May 2014. Employees in KBR’s construction division will leave the job site by this Thursday, Aug. 9, Gooch said, but will have the opportunity to catch on with other construction companies MPC and its parent Southern Co. are using to build the $2.88 billion plant.

KBR owns a portion of the Transport Integrated Gasification technology that will be used at the Kemper facility.

The coal plant has been the subject of a legal challenge from the Sierra Club, which currently has the issue in Harrison County Chancery Court for a second time. The Mississippi Public Service Commission voted in late June not to take any action on rate increase requests associated with the plant until the litigation concludes. The Mississippi Supreme Court last week denied MPC’s request to institute interim rate increases while the appeals process moved forward.

A MPC spokesperson did not immediately return cell phone and email messages Tuesday morning.

The Mississippi Public Service Commission voted 3-0 Tuesday morning to examine the formulas used to calculate return on equity for Mississippi Power Co. and for Entergy Mississippi.

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. It is used to measure a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested in, for example, things like new facilities and new infrastructure.

For utility companies, ROE is set as a percentage. The latest figures the PSC has approved for Entergy’s ROE is 11.63 percent; for MPC that figure is 10.62 percent. That’s about in the middle range for comparably sized utilities in the Southeast.

Each company uses multiple formulas to calculate its ROE, and takes the average of those formulas. For instance, MPC uses three formulas to calculate its ROE. The results generally end with a ROE of somewhere between 9 percent and 11 percent.

Commissioners voted Tuesday to hire consultants and to begin a series of hearings designed to examine the formulas. If the PSC decides it wants to change anything, it will have to be done in an entirely separate docket.

The hearings will likely last several months. It was unclear Tuesday if the first hearing would be a part of the regular meeting scheduled for September 11.

Mississippi Power is now 0-2 when it comes to collecting money to pay for its Kemper County coal plant.

The Mississippi Public Service Commission in June denied a 13 percent rate increase that would have generated about $58 million. The company quickly appealed to the Mississippi Supreme Court, which affirmed the PSC’s ruling Tuesday afternoon. The court voted 8-0 to deny the rate increase. Chief Justice Bill Waller Jr. did not participate.

Public service commissioners said in their denial that they would take no action on rate increases until litigation surrounding the plant had concluded. The Sierra Club has the  plant — which the group contends is an expensive and  unnecessary environmental hazard — before a Harrison County chancellor. This is the second legal challenge the Sierra Club has mounted against the facility.

CLARIFICATION AND UPDATE: The Court ruled Tuesday that the company could not raise rates while it appeals the PSC’s rate denial. The appeal itself is still pending. Also, Mississippi Power has issued a statement. Here it is, verbatim:

“While we certainly respect the actions of the state Supreme Court, we view their decision on our motion to grant interim rates as a loss for our customers that will result in increased costs related to the Kemper plant,” said spokesperson Jeff Shepard. “We anxiously await the Court’s decision on our appeal. Our goal, as always, is to do what is in the best interest of our customers while maintaining reliable and safe electric service.”

Moody’s Investor Service late last week placed Mississippi Power Co.’s ratings on review for downgrade.

It’s the second rating agency in two weeks to either downgrade the company’s credit rating or consider doing so. On July 3 Fitch Ratings downgraded MCP from “A” to A-.” Fitch also revised the company’s rating outlook from “stable” to “negative.”

Moody’s does not sound prepared to go that far, at least not yet. In a press release, Moody’s said it would keep Southern Co.’s ratings outlook stable, and that the downgrade review would not result in MPC’s rating dropping more than one notch from its current rating of “A2.”

Like Fitch, Moody’s said the company’s credit rating likely would not completely recover until the Kemper County coal plant started commercial operation, which is scheduled for May 2014. Both agencies cited decreased cash flow as one of the main drivers of their decision.

Cash flow, company officials have said, will suffer until cost recovery is allowed for the Kemper facility. On June 22, public service commissioners voted 3-0 not to consider rate increases tied to the coal plant until the Mississippi Supreme Court has its say on the Sierra Club’s latest challenge to it.

A few hours after another overrun for its Kemper County coal plant was revealed, Mississippi Power Co. said Monday it was appealing the Public Service Commission’s decision not to act on rate increase requests until the litigation surrounding the facility is finished.

The company appealed the PSC’s order to the Mississippi Supreme Court.

On June 22, commissioners voted 3-0 to deny a 13 percent rate increase the company wanted to employ to help pay for the Kemper plant. The increase would have generated about $58 million. As part of the denial, commissioners said they would not rule on any rate increase requests until the state’s high court had its say on the Sierra Club’s latest legal challenge to the facility. The environmental advocacy organization has opposed the plant from the jump, calling it expensive and unnecessary.

Mississippi Power’s appeal includes a motion for interim rate relief, according to a company release. Company officials have said the PSC’s denial could potentially preclude the recovery of construction costs until after the facility is completed, due to a possibly lengthy litigation timeline.

“The collection of interest costs for the plant during construction will accomplish two important objectives,” Moses Feagin, vice president and chief financial officer, said in the release. “One, to lower the overall cost of the plant for our customers, and two, to reduce the potential rate shock they would have otherwise experienced.”

Last week, Fitch Ratings downgraded MPC’s credit rating from “A” to “A-.” The ratings agency also revised the company’s rating outlook from “stable” to “negative.”

The Kemper coal plant’s Independent Monitors’ Report for the period through the end of May shows the project has crept closer to the $2.88 billion cap the Public Service Commission imposed on it.

Mississippi Power Co. now estimates that the cost to build the lignite coal-fired generation facility will reach $2.822 billion. It’s the second report in a row that lists an overrun. The report for the period through the end of April estimated construction costs at $2.76 billion.

MPC officials originally estimated that they could build the plant for $2.4 billion. The latest  report exceeds that figure by $422 million.

In late June, commissioners voted 3-0 to wait until the Mississippi Supreme Court has its final say on litigation related to the project to take any action on proposed rate increases MPC hopes to use to pay for the plant.

Fitch Ratings on Tuesday downgraded Mississippi Power Co.’s Issuer Default  from “A” to A-.”

Fitch also revised the company’s rating outlook from “stable” to “negative.”

The rating agency said the downgrades were in response to the Mississippi Public Service Commission’s order from late June in which commissioners denied a revenue increase the company had requested in connection with the Kemper County coal plant. MPC officials testified at a hearing that in order to raise about $58 million to apply toward the plant, customer rates would need to increase by 13 percent.

In denying the rate increase, commissioners said they would take no action on rate increases associated with the Kemper facility until the Mississippi Supreme Court has its say on litigation surround it. The Sierra Club currently has the issue before a Harrison County chancellor for the second time.

No matter the outcome at the chancery court level, it’s expected to reach the state’s high court again.

Fitch also expressed concern with the 15 percent cost overrun MPC revealed to monitors in May. Currently, the plant’s projected cost sits at $2.76 billion, 15 percent more than the original estimate of $2.4 billion.

“Fitch’s financial analysis indicates that if the project becomes operational within the currently projected capital costs and schedule, and based on the assumption that the MPSC authorizes a timely recovery of both capital and operating costs, Mississippi Power’s credit metrics are expected to revert to Fitch’s guideline ratios of a low risk ‘A-’ rated utility company by 2015,” Fitch said in a press release. “Until then, however, Fitch expects Mississippi Power’s credit metrics to remain considerably weak.”

Mississippi  Power Co. announced late Friday afternoon that the Kemper county coal plant’s costs are close to butting up against the $2.88 billion cap the Public Service Commission imposed on the project.

A company press release says the news was revealed during a meeting with independent monitors. It does not say how far along construction is. It also does not say when the meeting in which the cost information was revealed took place. There was a meeting set for early May between monitors and the company to address the project’s contingency being close to depletion.

The plant’s latest figures would have been included in the independent monitor’s June report. The monthly reports have not been made readily available to the public as far as being posted on the PSC website like the orders and various other filings  associated with the project have been.  The Mississippi Business Journal filed an open records request on June 1 for the June report.

The release also does not say how far along construction is. The PSC voted 2-1 — Northern District Commissioner Brandon Presley was the dissenting vote — April 24 to reissue Kemper’s certificate. Part of the order granting that certificate said that monitors and company officials would meet in early May to discuss the dwindling contingency and other matters.

Here’s the press release, verbatim:

Mississippi Power, in its monthly meeting with the Mississippi Public Service Commission (PSC) Independent Construction Monitors, reports the Kemper plant construction is progressing on schedule and continues to be the best generation option for customers. The plant will be on line May 2014 and immediately begin saving customers on fuel costs.

The construction costs are currently projected to be approximately $2.76 billion or 15 percent above the original construction estimate prepared in 2009. The PSC established a cost cap of $2.88 billion for plant construction.

 Mississippi Power will deliver additional economic value for the Project from increased byproduct sales, such as CO_2, and savings from lower financing costs. Because of these benefits to customers, the new estimate will not increase the rate impact of Kemper.

 “We are committed to bringing the Kemper Project on line, within the cost cap, to provide clean, safe and reliable energy to our customers,” said Cindy Duvall, company spokeswoman. “We work every day to find ways to bring value to our customers while preparing to meet their future energy needs.”

 Mississippi Power, a Southern Company subsidiary, serves approximately 188,000 customers in 23 southeast Mississippi counties.

Southern Co.’s latest 8k filing with the Securities and Exchange Commission contains news about former Mississippi Power Co. CEO Anthony Topazi.

Topazi, according to documents filed May 25, will retire as Southern Co.’s  executive vice president and COO effective Aug. 1.

Topazi left Mississippi Power in 2010 for its parent company. He was CEO when MPC gained PSC approval for the Kemper County coal plant. The plant is scheduled for completion in 2014, assuming the Sierra Club’s latest legal challenges are unsuccessful.

Southern Co. documents spell out a consulting agreement the company reached with Topazi. After his Aug. 1 retirement, Topazi will earn $1.7 million for consulting services rendered between then and Dec. 31, 2013, when the agreement expires.

To view the six-page filing click here.