Wednesday, August 8, 2012
JACKSON (AP) — Mississippi Power Co. has fired a joint venture of KBR and W.G. Yates & Sons Construction that was building part of the $2.8 billion Kemper County power plant. The project is more than $400 million over budget and has struggled to stay on schedule.
The pair was replaced by Performance Contractors of Baton Rouge, La., which was overseeing other work at the site north of Meridian.
Mississippi Power spokesman Jeff Shepard said the move would save money and speed up work. Shawn Shurden, a lawyer for the Mississippi Public Service Commission, says Mississippi Power representatives told him the move will save about $10 million. Shepard said that number was a ballpark estimate, but that it's too early to tell how much will be saved.
"We are always working on cost reductions," he said. "That's not anything new for this project or any construction project."
Houston-based KBR will still provide engineering and startup support on the unit that will convert lignite coal into burnable gas. Atlanta-based Southern Co. and KBR co-own that technology.
"The construction contract was the one that was closed," Shepard said. "The technology contract is still ongoing. Everything is great there."
Shepard said Yates, based in Philadelphia, Miss., has other contracts at Kemper. Yates is Mississippi's largest construction company, and the family that owns it donates heavily to mostly Republican candidates.
Shepard said KBR and Yates had about 150 supervisory or professional employees at the site, as well as about 400 construction workers. He said Performance Contractors is interviewing the construction workers, and could hire some of the supervisors and professionals, as well.
Kemper is a huge project for what is the smallest of four utilities owned by Southern Co. Mississippi Power wants to raise rates now to begin paying for its borrowing costs, but was denied by the Public Service Commission. The utility appealed to the state Supreme Court, which denied a preliminary effort to raise rates but is still considering the main appeal.
The plant was originally supposed to cost $2.4 billion, but cost estimates have risen above $2.8 billion. The company is supposed to stay under a $2.88 billion cap imposed by the PSC.
Mississippi Power says customer rates will rise by about 33 percent to pay for the plant. It says cost overruns won't hit customers because of lower-than-expected interest rates and higher expected sales of byproducts.
The Sierra Club opposes Kemper because it says burning coal will contribute to global warming, even though the plant plans to capture carbon dioxide and pipe it for injection to the ground. Louie Miller, the Sierra Club's state director, said replacing the contractors is more proof that the project is too troubled to continue.
"If the reports are accurate, for Mississippi Power to fire the co-owner and co-developer of their design technology is absolutely astounding," Miller said in a statement. "This will only lead to further delays, more cost overruns and likely litigation between aggrieved parties; all costs that Mississippi Power will try and pin on the ratepayer. This shocking development is one more reason it's past time to pull the plug on the Kemper plant."