Kemper County IGCC Project Costs Soar to $6.1B

Cost estimates for the Kemper County Integrated Coal Gasification Combined Cycle project (IGCC) have surged another $330 million since August, mostly owing to delays that have shifted the plant’s in-service date to the first half of 2016. 

Plant owner Mississippi Power’s latest monthly report submitted to the Mississippi Public Service Commission shows that the project’s total cost estimate subject to the $2.88 billion cost cap stood at about $4.86 billion at the end of September. Considering total exemptions and exceptions that total about $1.2 billion, the company now estimates the project’s total costs stand at about $6.1 billion.

It means that compared to the $2.2 billion originally estimated in 2004, total costs for the nation’s only large-scale integrated carbon capture and sequestration project under construction have now almost tripled.

But because Mississippi Power does not intend to seek any rate recovery or joint owner contributions for any costs related to building the IGCC plant that exceed the state-approved $2.88 billion cap, it will likely record an additional $418 million pre-tax probable loss for the third quarter of 2014.

The company disclosed in its August 2014 report to state regulators that the plant’s in-service date would be delayed to later in 2015. It promised to disclose specific revisions to the projected in-service date and resulting changes to cost estimates in late October.

On Monday, the company noted that it had placed the combined cycle unit and associated facilities of the Kemper IGCC project in service on Aug. 9, 2014. However, it said that “matters related to the time expected to be required for start-up activities and operational readiness, including enhancing the scope of specialized operator training” would push back the in-service start date for the remainder of the Kemper IGCC project to the first half of 2016.”

The revised cost estimate, which includes projected costs through March 31, 2016, adds $20 million that is related to start-up and operational readiness activities, and about $310 million that is pegged to delays. Only about 89% of capped plant costs are confirmed, the report shows.

First fire of gasifiers A and B have been pushed back about a month to November 2014 and December 2014, respectively. The report also shows that the project has yet to obtain Title IV acid rain and Title V operating permits.

Major milestones that the company recently achieved include wrapping up the purchase of 2,968 acres for the plant site. It also completed building the nitrogen plant, the water plant, the water storage lake, administrative and electrical buildings, and the lignite storage dome. Long-term contracts have also been signed for the sale of carbon dioxide, sulfuric acid, and ammonia.

The lignite-fueled Kemper County project is a 2 x 1 IGCC facility that uses the air-blown TRansport Integrated Gasification (TRIG) technology jointly developed by Southern Co., KBR Inc., and the Department of Energy at the Power Systems Development Facility in Wilsonville, Ala. The plant is being built next to a viable lignite reserve developed and mined by Liberty Fuels, a subsidiary of North American Coal Corp., which will provide feedstock for the IGCC plant.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)