ATLANTA — Southern Co. earnings slumped 52 percent to $297 million in the second quarter due mainly to cost overruns at a coal-fired power plant under construction in Mississippi, the company reported Wednesday.
The utility, based in Atlanta, reported earnings of $297 million, or 34 cents per share, 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, and the price of company shares dropped less than 1 percent to just over $45 in morning trading.
Company officials announced Tuesday that its shareholders would absorb an estimated $278 million in after-tax losses incurred while building a goal gasification plant in Mississippi's Kemper County. That project has cost the power company $611 million in after-tax charges this year.
Subsidiary Mississippi Power has cautioned that it is still reviewing project costs. Southern Co. CEO Thomas Fanning said the latest charges are the company's best estimate, and he could not guarantee there will not be future losses on the plant.
"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 costs, Southern Co. would have earned $575 million in the second quarter compared to the $602 million last year.
Project costs in Mississippi have dogged the company for two quarters. In a settlement with Mississippi utility regulators, Southern Co. 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 the United States can still rely on coal energy even if the country moves to restrict greenhouse gas emissions. Plant Ratcliffe is designed to turn lignite coal into a gas that is then burned to generate electricity. The facility is expected to capture much of the carbon dioxide released in the process. The captured carbon dioxide, a greenhouse gas blamed for causing global warming, will then be sold to companies who use it to extract oil from the ground.
Mild weather in the Southeast and a tepid economy also crimped the power company's earnings, executives said. Sales to retail customers dropped 2.9 percent over last year as unseasonably wet and cool weather cut into demand and reduced the company's margins as swollen rivers produced more energy through hydroelectric generation.
Fanning appeared more confident about the possibility of securing a federal loan guarantee for two nuclear reactors now under construction in eastern Georgia. While the utility earlier secured a preliminary deal to get the federal guarantees, it has not reached a final agreement. Fanning said U.S. Energy Secretary Ernest Moniz seems to view finalizing the loan guarantees as a high priority.
"It certainly has taken on a greater sense of urgency," Fanning said.
Southern Co. has asked Georgia regulators for a $737 million increase in its construction budget for the nuclear plant, which would raise the total to $6.85 billion.
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Follow Ray Henry on Twitter: http://twitter.com/rhenryAP.
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