One of the nation’s largest bond credit ratings agencies, Moody’s Investor Service, downgraded Mississippi Power Co.’s ratings on Thursday, bringing its rating outlook to negative.
The downgrade is on about $800 million of debt securities.
Moody’s stresses there is much uncertainty in getting Mississippi Power’s Kemper County power plant up and running. It’s already three years behind schedule. Also in a statement, the bond rating company also cited increased capital costs and higher projected operating costs. The project is more than $4 billion over budget.
“(This) has increased the possibility that the (integrated gasification combined cycle) portion of the plant may not be economic to operate at all,” the statement says.
This announcement concludes its review of the utility that began Feb. 6.
When asked about the new ratings outlook, Jeff Shepard, spokesman for Mississippi Power Co., said Thursday the utility is dedicated to financial integrity and accurate financial reporting.
“We remain committed to demonstrating the high degree of financial integrity that has enabled Southern Company to deliver customer and shareholder value over time,” Shepard said.
Moody’s rates the credit quality of a company’s individual obligations or of an issuer’s general creditworthiness.
Investors use the ratings to help price the credit risk of fixed-income securities, or bonds, they may buy or sell. Because major investors globally rely on Moody’s ratings, the ratings help to provide issuers of debt with stable, flexible access to those sources of capital, the company says.
Mississippi Power last week announced that lower natural gas prices and increasing operating costs of the project would make the Kemper County plant cheaper to run on natural gas than on lignite coal, even though the plant is designed to convert lignite into a gas to create electricity while extracting carbon dioxide and other pollutants. The utility still intends to complete and operate the plant on fuel from lignite coal.
The plant, which is currently running on natural gas, is scheduled for completion by mid-March 2017, after its eighth delay in the past 12 months. It was supposed to go into full operation running on synthesis gas, also known as syngas, by May 2014.
This latest delay pushes the plant’s price tag to $7.10 billion.
Moody’s says these factors have severely hurt the plant’s economic prospects: “These developments raise questions as to the merits of operating the (integrated gasification combined cycle) portion of the plant at all, which will lead to a higher degree of regulatory, political and public scrutiny of the plant at a time when the utility intends to pursue critical rate recovery proceedings and a determination of prudency, which has not yet occurred,” the statement says.
Mississippi Power is required to file a rate case on the Kemper County plant with the Mississippi Public Service Commission by June 3.
Moody’s says the utility’s rating outlook could improve if the plant successfully comes on line and demonstrates consistent and reliable commercial operation and the public service commission approves an adequate rate recovery for remaining recoverable plant capital costs and higher future operating costs. But that is unlikely, Moody’s says.
The ratings and outlook of the utility’s parent company, Southern Co., are unchanged, the statement says.