Moody's puts Mississippi Power on review for downgrade over Kemper IGCC plant
Moody’s Investors Service has placed Mississippi Power’s ratings on review for downgrade as a result of the utility’s continued delays and cost overruns for its coal gasification plant in Kemper County.
Mississippi Power’s bond are now at or near Moody’s lowest investment grade rating; a downgrade would push them into non-investment grade, or junk, territory.
Moody’s action does not affect the ratings of Southern Co., Mississippi Power’s corporate parent, but the ratings agency warned further plant delays at other subsidiaries could hurt the Atlanta-based holding company.
Moody’s cut Mississippi Power’s rating to near junk status in 2015. Since then, the utility has announced several more delays to its beleaguered Kemper integrated gasification combined-cycle project, most recently in early February when it delayed the expected online date for the project by one more month.
The 582 MW project is designed to convert coal into a synthetic gas to burn in a combined cycle generator, and is now slated to begin operation by the end of February. Updated costs are just over $7 billion, more than double the original, $2.9 billion cost estimate.
In all, Mississippi Power has extended the project’s online date nine times. Each delay can add tens of millions of dollars to the project’s cost. The most recent delay added $51 million to the cost estimate.
Moody’s says the rising costs increase the risk that Mississippi Power will not receive full regulatory recovery of $2.88 billion of plant costs subject to a cost cap established by the Mississippi Public Service Commission, $1.5 billion of costs not subject to the cap, and higher operating costs once the plant is placed into service.
Moody’s also noted that Mississippi Power and Southern have said that their 2017 fuel system costs completed last year reflect significantly lower natural gas costs than previously estimated. Those lower costs will factor into the economic viability analysis the utility is now conducting on the project.
That analysis may affect the prospects of the project’s ability to recovery costs and the “standalone financial condition” of the plant when it is fully operational, including whether the plant “will exhibit financial metrics consistent with an investment grade rating.”
While Moody’s did not take action on Southern Co., Mississippi Power's parent, the rating agency said Southern’s rating could be negatively affected if, among other things, there are additional, material debt financed acquisitions at the parent company or further delays or cost increases at Georgia Power's Vogtle nuclear construction project.
- The Greeneville Sun Mississippi Power could lose investment-grade credit rating
- Moody's Investor Service Rating Action: Moody's places Mississippi Power Company on review for downgrade
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