ATLANTA — The Southern Co. utility said Wednesday that it took a $297 million after-tax loss on a Mississippi power plant and abandoned its attempt to raise its budget for a nuclear plant in Georgia.
Earnings for the Atlanta-based utility slumped 52 percent to $297 million in the second quarter, mainly because of cost overruns at a coal-fired power plant in Mississippi's Kemper County.
The utility reported earnings of $297 million, or 34 cents per share, down from $623 million, or 71 cents per share, a year ago. Earnings would have risen to 66 cents with one-time costs removed. That was two cents shy of Wall Street projections.
Southern shares fell 58 cents to close at $44.84.
The project to build Plant Ratcliffe, a coal gasification plant in Mississippi, has cost the Southern $611 million in after-tax charges this year. There could be more. CEO Thomas Fanning said the latest charges represent the company's best estimate, and he could not guarantee there will not be future losses.
"I certainly hope not. I can't guarantee it," Fanning said in an interview. "The biggest remaining risk is hitting schedule. As we progress in the construction, obviously we tend to kind of hone in on what the final cost will be."
Excluding one-time items, Southern Co. would have earned $575 million in the second quarter compared to the $602 million last year.
Construction costs in Mississippi have dogged the company for two quarters. In a settlement with Mississippi utility regulators, Southern agreed to cap costs for its customers at $2.4 billion. Customers may still have to pay off as much as $1 billion in bonds needed to finance the rest of the project, though the utility will not make a profit off that borrowed money.
The plant uses first-of-its-kind technology that supporters say will prove that the nation can still rely on coal energy even if there are further limits on greenhouse gas emissions. Plant Ratcliffe is designed to turn lignite coal into a gas that is burned to generate electricity. The facility is expected to capture much of the carbon dioxide released in the process and sell it to companies that use it in oil production.
Separately Southern gave up political ground on its budget to build two more nuclear reactors at Plant Vogtle in eastern Georgia. Southern Co. subsidiary Georgia Power owns a 46 percent stake in the project.
Southern Co. officials sought permission earlier this year to raise the construction budget for its share of the nuclear plant by $737 million to $6.85 billion. The company blamed the cost increases on licensing delays and construction and production problems. Under a preliminary deal reached Wednesday, Southern said it will drop requests to raise that budget. Instead, utility regulators will continue reviewing construction spending at regular intervals and decide whether the costs can be passed along to customers.
The elected members of Georgia's Public Service Commission are expected to vote on the deal in October.
The agreement would help Southern Co. avoid publicly disclosing sensitive information as it negotiates with plant designers and builders over which companies are responsible for more than $900 million in extra charges, primarily from licensing delays.
It also shifts more financial risk to Southern Co. If spending is below an approved budget, Georgia regulators must legally assume the utility's spending is prudent – and, therefore, can be passed along to customers – unless proven otherwise. If Southern Co. exceeds the construction budget, the burden is on the company to show that the spending is justified.
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