A Mississippi power cooperative that decided to dump its stake in the struggling Kemper Project is now reaping the rewards of that exit: its credit ratings increased last month in part due to lower financial risk.
On Dec. 23, Fitch Ratings upgraded Cooperative Energy’s 2009 $35.4 million bond issue from A- to A, with a stable outlook, noting that the co-op’s decision to get rid of its 15 percent stake in the Kemper project, with its significant cost overruns and delays, played a significant role.
“The upgrade reflects lower financial and operating risk given Cooperative Energy’s decision to terminate its 15% ownership interest in the Kemper Integrated Gasification Combined Cycle (IGCC) facility — an advanced generating technology with high execution and operating risk. The decision to exit Kemper was mainly driven by escalating cost overruns and ongoing construction delays. Total project cost is currently estimated at $6.6 billion, from an original forecast of $2.8 billion,” Fitch wrote in its report.
Originally slated to begin fully operating in May 2014, the Kemper plant has missed its most recent deadline of Dec. 31, and Mississippi Power said last week it has set Jan. 31 as the new goal for the facility to begin commercial operation. The project’s cost is now more than $7 billion.
Cooperative Energy, formerly known as South Mississippi Electric Power Association, and with a 423,000-member base over 32,000 square miles, originally agreed to buy a 17.5 percent stake in the Kemper plant. After costs escalated, the percentage dropped to 15 before the various delays and overruns led to the cooperative pulling out completely in May 2015.
Cooperative Energy said in a statement that the improved bond ratings will lower borrowing costs and provide its members more favorable rates.
“This rating upgrade reflects the success of our strategy to move from purchased power to owned generation resources, and from coal to natural gas and renewable energy,” said Cooperative Energy President and CEO Jim Compton.