Kemper Coal Crashes Southern Company Rating and Stock Price

Standard & Poor’s lowered Southern Company’s rating from stable to negative because of the risks of Kemper Coal in Mississippi, and SO’s stock price plummetted. This was immediately after activists grilled SO on that and other topics at the SO stockholder meeting. Wait ’till S&P catches on to the risks of SO’s 19-months-late and $1 billion-over-budget nukes at Plant Vogtle in Georgia! Or SO’s non-action so far on the challenge of distributed solar.

Kristin Jones wrote for WSJ 24 May 2013, S&P Lowers Outlook on Southern Co., Noting Project Risks,

Standard & Poor’s lowered its outlook on Southern Co. (SO), noting risks associated with a problematic power plant construction project.

S&P affirmed its rating on the Atlanta-based electric-power company at A, five notches into investment grade. The outlook was revised to negative, from stable.

The ratings firm said its outlook reflected a series of regulatory, operational and risk-management issues that have affected the Mississippi Power business in the last 12 months, including problems with financial reporting and increased project costs in the construction of a power plant.

S&P said the issues raised “broader concerns about effective project oversight, handling of regulatory risk, and overall risk management within Southern Co.”

If the company isn’t able to resolve the challenges at Mississippi Power or if similar issues arise at Georgia Power, the company’s rating could be downgraded. If on the other hand, Southern can address the challenges in a timely manner, the outlook could return to stable.

“Or if similar issues arise at Georgia Power”: linking Kemper Coal and Plant Vogtle isn’t just for Bloomberg’s Betty Liu anymore. Now Standard and Poor’s and the WSJ are piling on. And look at SO’s stock price:

Southern Company Stock May 2013

That’s an 8.5% drop in one month, with the biggest drop starting on 22 May 2013, the day of the SO stockholder meeting. Maybe Ray Henry’s AP coverage of Linda St. Martin’s criticism of Kemper Coal had some effect on this SO stock drop and S&P downgrade….

Georgia Power can charge customers for Plant Vogtle cost overruns even if it’s cancelled. Last time SO built nukes there, the costs were 26 times the original per-unit projections. Public opposition in Mississippi to that kind of overcharge to the public or Mississippi Power customers got SO to back off and eat some of the costs which is what led to the S&P downgrade. What if the Georgia legislature passed HB 267 to cap costs at Plant Vogtle? What would S&P and SO’s stock price do then?

Dear Tom Fanning: Time to get on with switching to distributed solar. If SO gets out in front, it can lead the region, the country, and the world. If SO stays behind, pushing big baseload boondoggles like Kemper Coal and new nukes at Plant Vogtle, SO’s rating and stock will suffer. How long will SO’s stockholders tolerate that? Cobb EMC’s stakeholders staged a revolt and replaced a majority of the board, after which Cobb’s new CEO said “we’re just ripe for solar power” and cancelled all proposed coal plants and started building solar. Tom Fanning, you can do that before your successor does.


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  1. Pingback: Kemper Coal cost overruns at Southern Company Stockholder Meeting @ SO 2013-05-22 | On the LAKE front

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