Boston, MA 04/30/2014 (wallstreetpr) – Close on the heels of announcing an increase in dividend payout for the thirteenth straight year, The Southern Company (NYSE:SO) disclosed that it will take charges in the first quarter even as the coal-based plant is facing cost-overrun and delay in commissioning the project.
As if this is not enough, the Supreme Court has confirmed the authority of the Environmental Protection Agency on the air pollution regulation from power plants of coal-based utility companies. This will not only put strain on the company’s costs immediately to avoid air pollution, but will also weigh the costs of involving of cleaning up rather than shutting down.
In a filing with the regulator, Securities Exchange Commission (SEC), The Southern Company (NYSE:SO) revealed that its first quarter results will include a charge of $235 million besides delay in starting its $5.5 billion power plant in Mississippi. This is in addition to the $729 million charges with regard to cost overrun of over $1 billion in the 582-megawatt power plant this year. The delay in plant will push the commissioning of the unit to 2015 first half, which means, one year behind the schedule.
When the company announced its intention to set up the plant, it was estimated to spend a little over $2 billion. With the revised estimate and cost overrun, the plant’s cost is predicted to be over $5.5 billion.
Separately, the Supreme Court’s verdict in favor of the environmental agency, which sees it as a victory to fight global warming and cut down carbon discharge, will also hurt its costs. Now, Southern Company will have to make provision for any eventuality of damages that may be caused, irrespective of the distance of the place from the plant as long as the air was polluted by carbon discharge.
According to an estimation of the Energy Information Administration, about 20% of the total coal-based power plants in the U.S. are expected to cut down their dependence on coal by the year 2020. This could force power companies to scout for natural gas, which is cheaper than coal now, and Southern Company is no exception.
Meanwhile, The Southern Company (NYSE:SO)’s first quarter adjusted earnings are predicted to be either in line with expectations or top the analysts’ estimations.
