What Just Happened to Southern Company Stock—And Why It’s Struggling
Southern Company (SO) stock corrected 2% on September 12, but it has substantially underperformed the broader utility industry over the past year. SO has lost more than 4% in the past year, while the Utilities Select Sector SPDR (XLU) has risen nearly 12%. SO’s power plant woes have significantly hurt its stock performance lately.
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Power plant woes
There doesn’t appear be an end to Southern Company’s power plant glitches. The management of the Georgia-based utility has recently decided to go ahead with the construction of its peculiar Vogtle nuclear power plant, and state regulators will now review Southern Company’s decision and will give the final call on Vogtle by early next year.
The total cost of the Vogtle project has now jumped from $14 billion in 2008 to more than $25 billion. (You can learn more about these power plant issues in Market Realist’s series How Southern Company’s Power Plant Snags Are Hurting Its Stock.)
Southern Company’s Kemper County power plant in Mississippi also took a similar hit. The Kemper plant had an original cost estimate of $3.0 billion, but after being delayed for more than three years, the project cost rose over $7.5 billion.
Both these power plant projects have taken a severe toll on Southern Company over the past couple of years, and the trend so far doesn’t rule out further delays and cost overruns going forward. To add to these woes, even if Southern Company completes its Vogtle power plant, its rate recovery is still expected to be highly challenging.