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ATLANTA (AP) - Southern Co. shareholders will absorb $450 million in losses incurred while building a new coal-fired power plant in Mississippi, raising the total write-offs on the construction project to nearly $1 billion, utility officials said Tuesday.
The utility announced the pre-tax write-off on its massive project in Mississippi's Kemper County before releasing its second-quarter earnings Wednesday. Company officials had earlier estimated the most recent charge would be around $160 million or more, significantly less than the losses announced late Tuesday. After taxes, the loss is estimated at $278 million.
Those losses on Plant Ratcliffe may not be the last.
"I cannot guarantee, will not guarantee, that there won't be further increases, but, again, feel good about the process that we are going through to forecast, estimate what we have left to spend to complete the project," Mississippi Power CEO Ed Holland told The Associated Press in an interview.
Project costs have stung the company, its owners and its customers. Southern Co. earlier absorbed a $540 million pre-tax loss on the plant, which Southern Co. CEO Tom Fanning described in May as a "bitter pill for us to swallow." That month, the firm abruptly named Holland as its president of the Mississippi subsidiary. A state regulator has publicly accused the subsidiary's former president, Ed Day, of withholding documents from regulators relating to cost increases.
Opponents of the project have long criticized the company's use of coal and its costs.
"I think if I were a Southern Co. shareholder, I'd be very concerned," said Jenna Garland, a spokeswoman for the Sierra Club's Beyond Coal Campaign. "And if I were a Mississippi Power ratepayer, I'd be even more concerned about how much my power bills are going to go up."
Company officials said the latest write-off was the result of an ongoing review of the spending necessary to finish the power plant. Southern Co. subsidiary Mississippi Power said it may experience additional construction costs or schedule delays, according to a federal disclosure report. Mississippi Power also cautioned there were additional risks building a plant with first-of-its-kind technology.
Southern Co. officials have struggled to contain building costs, which have grown to more than $4.7 billion when the power plant, a lignite mine, carbon dioxide pipeline and other expenses are included, according to company filings.
In a settlement with Mississippi utility regulators, the company agreed to only charge its customers for $2.4 billion in plant construction costs. Customers will also have to pay off as much as $1 billion in bonds needed to finance the project, though Southern Co. will not make a profit off that borrowed money.
When finished, Plant Ratcliffe is supposed to turn coal into a gas, then burn it to generate electricity. The process is meant to capture much of the carbon dioxide created in the process. Carbon dioxide is a greenhouse gas blamed for causing global warming.
The captured gas will then be sold to companies that use it to extract oil from the ground. If successful, company executives have hoped the project will demonstrate that the United States can still rely on coal even if the country limits greenhouse gas emissions.
Southern Co. subsidiary Georgia Power is also having trouble keeping another building project under control. The firm has asked regulators to raise its construction budget on a nuclear plant in eastern Georgia by $737 million to roughly $6.85 billion. The company has cautioned those costs may also rise.
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