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These Key Factors Drove Southern Company’s 4Q16 Results

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Part 3
These Key Factors Drove Southern Company’s 4Q16 Results PART 3 OF 7

Kemper County Power Plant Is a New Headache for Southern Company

Kemper County power plant hurts 4Q earnings

The Kemper County power plant in Mississippi continued to hurt Southern Company’s (SO) earnings. It cost the utility $206 million in 4Q16. Southern Company is set to complete the Kemper County plant next month after seven years at the cost of $7.1 billion. In 2010, the plant was forecasted to cost $3 billion.

Kemper County Power Plant Is a New Headache for Southern Company

 

Is Kemper plant cost inefficient at current gas prices?

The economics of the “clean-coal” Kemper County power plant are expected to be a new headache for Southern Company as the plant may become competitive only if natural gas prices are high. Southern Company is reported to have done a viability analysis at natural gas prices at $5 per MMBtu (million British thermal unit). However, according to the EIA (Energy Information Administration) forecast, gas prices may not reach $5 until 2030.

Thomas Fanning, the CEO of Southern Company, said during the 4Q16 earnings call that the company expects natural gas prices in the double digits.

Southern Company is planning to file rate cases for the plant’s incremental costs to be passed on to ratepayers. There’s growing criticism regarding this move, as the plant was considered to be poorly executed and suffered from frequent delays.

Read Duke Energy’s 4Q16 earnings highlights in 4Q16 Earnings: Duke Energy Stock Rose 3% despite Dim Outlook.

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