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Southern Company's Struggle: An Investor's Pespective

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Southern Company's Struggle: An Investor's Pespective PART 1 OF 7

Southern Company and the Problem of Power Plants

SO issues another in-service date for Kemper

Southern Company (SO), one of the largest electric utilities in the US, has been stuck due to frequent delays and cost overruns in the construction of its Kemper County and Vogtle nuclear power plants. But the Kemper power plant is expected to be operational by the end of April 2017.

Mississippi Power, Southern Company’s subsidiary, had witnessed tube leaks in one of the gasifiers in the Kemper County power plant last month. The leaks led to an outage at the plant for corrective actions.

Southern Company and the Problem of Power Plants

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In a filing released last week, Southern Company mentioned that this latest delay will likely cost an additional $70 million, which would take the total plant’s cost beyond $7.2 billion. SO started to construct the plant in 2010, with a cost estimate of $3 billion.

Meanwhile, on a YTD (year-to-date) basis, Southern Company stock has gained just 1.5%, while the Utilities Select Sector SPDR (XLU) has managed to soar by more than 6% so far this year. The SPDR S&P 500 ETF (SPY) (SPX-INDEX) has gained 5% over the same period.

Notably, the utility sector makes up nearly 3.2% of SPY, and Southern Company accounts for more than 7.6% of XLU. The above chart compares the performance of Southern Company, XLU, and SPY over the past year.

Will Vogtle sting SO, too?

Westinghouse Electric, meanwhile, might be a new headache for Southern Company going forward. Westinghouse, a principal contractor at SO’s Vogtle nuclear plant, recently filed for a bankruptcy protection, which could lead to further delays at the Vogtle plant.

Continue to the next part for a look at SO’s chart indicators.

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