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Mississippi Power could lose investment-grade credit rating

The increasing price and declining economic competitiveness of its $7.1 billion Kemper County power plant may cost Mississippi Power Co. its investment-grade bond rating from one of the nation’s three main credit rating agencies.

Moody’s Investors Service said Monday that it’s considering lowering the electric utility’s credit rating, now at Moody’s lowest investment-grade level, after Mississippi Power announced it would again review projections of how much Kemper will cost versus how much a typical natural gas plant would cost.

Moody’s said it’s not considering downgrading the credit rating of the Southern Co., Mississippi Power’s Atlanta-based parent, noting Mississippi Power is a small part of the overall company and that Kemper is having “a material but thus far manageable impact on the parent’s consolidated financial condition.”

The plant was originally supposed to cost $2.9 billion and be complete in 2014. Mississippi Power still hasn’t achieved commercial operation, although it now hopes to do so this month. Southern Co. has so far shifted $2.7 billion in losses onto shareholders. Customers could ultimately be asked to pay $4.3 billion.

Any credit downgrade could increase Mississippi Power’s cost of borrowing. Some investors such as pension funds are barred from owning bonds that aren’t investment grade.

Mississippi Power spokesman Jeff Shepard repeated that the company wants to maintain a high credit rating.

“Strong credit ratings are important to securing low-cost financing for the benefit of customers,” he said.

Because natural gas prices have fallen and projected Kemper operating costs have risen, the internal review could be unfavorable for Kemper, giving more ammunition to critics who are trying to get regulators to block Mississippi Power from recovering money from ratepayers.

“Southern and Mississippi Power expect the reduction in projected long-term natural gas prices and higher estimated operating costs for the project to negatively impact the analysis,” Moody’s wrote of the review, which is supposed to be finished this month.

Moody’s said it will base its decision on the results of the analysis, whether the company meets the latest completion deadline, Southern Co.’s support for Mississippi Power, and what Mississippi Power’s financial condition will be once Kemper is operating.


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