Coal news and updates

Southern clean coal project cost almost triples on delay

Southern Co (SO) said its first-of-a-kind clean coal power plant in Mississippi will cost almost three times more and take three years longer than originally proposed.

The estimated cost of the Kemper County project is now $6.1 billion and it’s expected to be in service in the first half of 2016, Atlanta-based Southern said today in a filing. The company initially said the project would cost $2.2 billion and begin generating power four years after it was proposed in 2009.

“It’s the gift that keeps on taking,” said Paul Patterson, a New York-based analyst for Glenrock Associates LLC. “This is one of many write downs and it’s a disappointment, obviously.”

The plant would be the first designed to capture carbon dioxide by turning coal into a gas, with technology that Southern plans to sell to others as countries from the U.S. to China seek to cut greenhouse-gas emissions. Kemper will heat the coal to high temperatures to turn it into a gas and then separate carbon dioxide that can be piped to oil fields to improve output.

Kemper is one of two multibillion-dollar projects that Southern, which sells power to 4.4 million customers from Mississippi to Florida, is building as alternatives to natural gas-fired power plants. The other is a $14 billion two-reactor expansion of its Vogtle nuclear plant in Georgia. U.S. utilities have been adding gas-fired plants because they are cheaper than nuclear and pollute less than coal.

The increased Kemper County costs will crimp third-quarter profit by $258 million, the company said today. The project has already surged past the $2.88 billion limit that can be billed to customers under an agreement with Mississippi regulators. Today’s charge adds to $963 million shareholders have already shouldered from project cost overruns in four of the prior six quarters.
Thinning Oil

While other plants gasify coal, Kemper will be the first to remove carbon dioxide from the resulting fumes. The CO2 will be sold to Plano, Texas-based Denbury Resources Inc. (DNR), which will inject it into oil fields to thin the fuel and allow it to flow more readily to the surface.

Southern estimates the Kemper plant’s greenhouse emissions will be about 850 pounds per megawatt-hour of power produced, less than the 1,100-pound limit proposed by the Environmental Protection Agency for new plants. The average CO2 emission rate from U.S. coal plants is 2,249 pounds per megawatt-hour.

While Southern has no plans to replicate the plant in the U.S., it sees a market for the technology overseas. Along with Houston-based construction company KBR Inc. (KBR), which is helping build the facility, Southern is trying to sell similar plants in China, where gas is more expensive and coal is abundant.

Source: Bloomberg