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Southern Company: Analyzing Recent Changes in Key Indicators

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Southern Company: Analyzing Recent Changes in Key Indicators PART 1 OF 5

Southern Company Delays Its Kemper Power Plant

Kemper plant

It seems that the Kemper County power plant hasn’t dented Southern Company (SO) enough. According to the company’s SEC filing on March 16, 2017, it said that it doesn’t expect the plant to be operational by mid-March. It hasn’t given an updated in-service date for the plant, but the next cost and schedule update is expected by early April 2017.

Southern Company, one of the largest regulated utilities in the US, has been struggling due to frequent delays and cost overruns at the Kemper County power plant. It started to construct the plant in 2010 with a cost estimate of $3 billion. After seven years of construction, the plant expects more delays with a total cost of more than $7.1 billion.

Southern Company Delays Its Kemper Power Plant

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So far, Southern Company stock has risen 3% this year. However, it’s underperforming its peers. The Utilities Select Sector SPDR (XLU) rose 6% during the same period and followed broader markets (SPY) (SPX-INDEX).

Issues with the plant

Mississippi Power, Southern Company’s subsidiary, witnessed tube leaks in gasifiers early this month. The leaks led to an outage at the Kemper plant for corrective actions. More importantly, the company expects additional costs of $25 million–$35 million per month.

It should also be noted that the plant is expected to only be competitive if natural gas prices are high. Southern Company is reported to have done a viability analysis with natural gas prices at $5 per million British thermal units. According to the U.S. Energy Information Administration’s forecast, gas prices might not reach $5 until 2030.

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