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Southern Company Unit Sees Further Rise in Kemper Costs

Mississippi Power, a subsidiary of electric utility firm Southern CompanySO , faces additional tax bills as the Kemper clean coal power plant is expected to see further delay.

The company is evaluating the project's schedule and expects it to come online during the first half of the next year but not by Apr 19, 2016. Mississippi Power anticipates costs to increase another $15 million to support the plant's startup and commissioning activities.

Moreover, the company is expected to incur additional costs of about $25-$30 million per month, above its cost cap, for deferring the plant's start up beyond March. Mississippi Power may also be charged about $13 million per month and $7 million per month as financing and operating costs, respectively.

Also, due to the delay beyond Apr 19, the company would be required to return $234 million to the Internal Revenue Service. This is the amount it had received as tax credits for the project. Southern Company is expected to support these tax needs of its unit.

The Kemper project has already seen a surge in costs. The projected cost for the plant is about $6.27 billion, significantly above the previous estimation of about $2.4 billion.

Southern Company is one of the largest and best-managed electric utility holding companies in the U.S. The firm dominates the power business across the southeastern region. With good rate base growth and constructive regulation, we expect the firm to generate steady earnings and dividend growth in the coming years through its long-term power contracts. However, the challenging economic environment and delays associated with existing construction projects may hamper Southern Company's results in the next few quarters

Currently, Southern Company carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the electric power space are Black Hills Corporation BKH , Brookfield Infrastructure Partners L.P. BIP and Dynegy Inc. DYN . All these stocks sport a Zacks Rank #1 (Strong Buy).

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DYNEGY INC-NEW (DYN): Free Stock Analysis Report

SOUTHERN CO (SO): Free Stock Analysis Report

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BLACK HILLS COR (BKH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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