Dive Brief:
- South Mississippi Electric will not follow through with its plan to purchase a stake in the Kemper County coal gasification and combined-cycle project, SNL reports, pointing to delays and cost overruns since the purchase agreement was signed in 2010.
- Originally the wholesale electric power cooperative had agreed to purchase 17.5% of the Mississippi Power facility, but that was later dropped to 15% after costs escalated. The Kemper plant, when completed, will convert coal into a cleaner burning gas to be burned in a combined-cycle turbine.
- While the Kemper facility began generating gas power last year, it is not expected to begin burning the synthetic gas until 2016, and costs have risen from an initial estimate of $2.2 billion to now exceed $6 billion.
Dive Insight:
South Mississippi Electric says it can no longer justify the rising costs at the Kemper coal gasification plant. With costs now reaching $6.2 billion, the utility said it no longer believed the deal was good for its member cooperatives.
"We entered into the purchase agreement in 2010,” Jim Compton, general manager and CEO of South Mississippi, said in a statement. “Since then, there have been multiple changes in the project, and also changes in our power supply needs. The board determined that proceeding to closing was not in SMEPA's best interests.”
According to the cooperative, updated studies showed costs to participate in the project had increased to the point that the "rate impacts necessary for ownership would not best serve the needs of SME’s 11 Member cooperatives or their combined 419,000 members," the cooperative said. "The asset purchase agreement permits termination of SME’s participation in the project due to the delay in closing.
Located in Kemper County, Mississippi the 582-MW facility would be the first Mississippi Power baseload plant built in more than 30 years. It is one of two coal gasification plants in operation in the United States today, along with Duke's Edwardsport plant in Indiana.
