Mississippi Power Company Exhibit_(TOA-1)

MPSC DOCKET NO. 2009-UA-0014 Page 1 of 34

Kemper County IGCC Certificate Filing

FILED

DEC-7 2009

MSS.gosuo SERVIC

COMMISSION

MississiPPI Power Company

Updated Design, Description and Cost of

Kemper County IGCC Project

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Kemper County IGCC Certificate Filing

Table of Contents

Table of Contents

• Section 1.0 - General Project Description

• Section 2.0 - Plant Site Description

• Section 3.0 - Fuels Overview

• Section 4.0 - Environmental

• Section 5.0 - Engineering, Procurement and Construction

• Section 6.0 - Commissioning, Start-up and Operations

• Section 7.0 - Project Risk Mitigation

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Kemper County IGCCCertificate Filing

Table of Appendices

Table of Appendices

• Appendix A Technical Description ofTRIG= Technology

• Appendix B Capital Cost Estimate CONFIDENTIAL

• Appendix C Plant General Arrangement Drawing

• Appendix D Map of Wilcox Lignite Formation

• Appendix E Mine Site CONFIDENTIAL

• Appendix F Lignite Miner Evaluation Summary

• Appendix G Marston &Marston, Inc. Mine Report CONFIDENTIAL

• Appendix H Project Infrastructure Map

• Appendix I Construction Air Permit and Stormwater Permit

• Appendix J Table of Required Permits and Approvals

• Appendix K Engineering, Procurement and Construction Schedule CONFIDENTIAL

• Appendix L Plant Staff Organizational Chart

• Appendix M Graph of Availability Ramp Rate

• Appendix N Project O&M and Ongoing Capital Costs CONFIDENTIAL

• Appendix O ScottMadden Risk Assessment Executive Summary

• Appendix P PSDF Lignite Test Summary CONFIDENTIAL

• Appendix Q Southern Company TRIG= Technology Assessment CONFIDENTIAL

• Appendix R Water Supply Process Diagram

• Appendix S Lignite Cost CONFIDENTIAL

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1.0 Introduction and General Description

1.0 Introduction and General Description

1.1 Generating Plant Overview

The power generating plant proposed for Kemper County is an Integrated

Gasification Combined Cycle (IGCC) design. Unlike a conventional coal-fired

power plant-which burns coal to produce heat that converts water into steam

that drives a steam turbine-generator-an IGCC plant tums the coal into a

synthesis gas (syngas) that is used to fuel a combined cycle generating plant. A

simplified depiction of the IGCC gasification technologydesign for the Kemper

County IGCC Plant (Plant) is shown in Figure 1.

Sulfur, Ammonia, and CO2 CO, Compressor Transport Removal

Gasifier

HTHP

Particulate Mercury

Lignite Filter Removal

Feed

system

ÍRSG with

SCR

Syngas

Cooler Steam

Gas Turbine/ Turbine/

Generator Generator

AirCompressors

'

IGCC Plant Isometric with

, CO2 Cagwe

Figure 1 - Simplified Depiction of TRIGTM IOCÛ PrOCOSS

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1.0 Introduction and General Description

The IGCC Plant willbe fueled with lignite which is surface mined at the

mine site adjacent to the Plant. The lignite willbe delivered to the Plant over

conveyors, throughcrushers, into silos, and then into driers where the lignite is

dried to approximately one half of its original moisture content. This lignite

handling system is similar to those used in existing coal plants. The lignite is

then pulverized and fed into the gasifier. Inside the gasifier, a proven chemical

process similar to fluid catalytic cracking heats the lignite and extracts the

syngas. After the syngas is cooled, it goes throughthe processes necessary to

remove the particulates, sulfur, nitrogen oxides (NOx)and mercury contained in

the syngas. Ammonia and sulfuric acid are marketable products created from

these cleanup processes. In the next stage, carbon dioxide (CO2)is removed

from the syngas stream. The CO2 can then be compressed and delivered for

sequestration via an enhanced oil recovery process. The cleaned syngas is then

used to fuel a combined cycle generating plant similar to Plant Daniel Units 3 and

4. This combined cycle configuration consists of twogas turbines(GT)with

associated generators, two heat recovery steam generators (HRSG) and a single

steam turbinegenerator (STG). The syngas powers the two GTs and the gas

turbineexhaust provides heat to the HRSGs to produce steam which drives the

steam turbine. The combined output of the three generators is delivered to the

electrical grid. A detailed description of the Plant is provided in Appendix A.

1.2 Plant Performance

The table below shows the Kemper County IGCC Project's summer peak

performance data. The company's reference combined cycle design allows for

the ability to obtain additional MW capacity by placing burners in the HRSG. This

feature, which takes advantage of the fact thatthe HRSG is already producing

steam, allows the production of additional steam and additional megawatts. This

is commonly referred to as supplemental or duct-firing capacity.

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1.0 Introduction and General Description

Table 1 - Kemper County IGCC Performance Data

Average Annual Heat

Summer Capacity (MW)

Rate (BtulkWh)

Base - Lignite 522 11,708

Supplemental -

60 9,619

Natural Gas

13 Estimated Project Cost

The table below shows the capital cost summary for the Project. A more

detailed estimated is provided in confidential Appendix B.

Table 2 - Kemper County IGCC Capital Cost Summary

Cost

Area ($in millions)

Land $29.5

Project Development $38.5

Engineering, Procurement and Construction $1,854.0

Fuel Handling $87.1

Transmission (Excluding Land &Land Rights) $111.3

Carbon Capture $302.6

Pre-COD O&M Capitalized $56.3

Start-up $41.8

Project Contingency $161.6

Ad Valorem Taxes $13.0

SUB TOTAL $2,695.7

Less Incentives and Benefits ($296.0)

TOTAL $2,399.7

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1.0 Introduction and General Description

1.4 Commercial Operation Date (COD)

For purposes of the economic analysis and financial projections contained in this

filing, Mississippi Power Company (MPC or theCompany) has assumed the

Kemper County IGCC Project will be placed into commercial operation in May,

2014. This allows the Company to maximize the federal, state and local benefits

available to reduce the cost of the Project to customers.

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2.0 Site Description

2.0 Site Description

The Plant site is located near the unincorporated community of Liberty in

Kemper County, Mississippi, on or about latitude 32° 38' N and longitude 88° 46'

W. The site is comprised of approximately 1,750 acres. MPC currently owns

770 acres of the site and possesses options to purchase the remaining acres

from the current landowners.

The site was selected from a pool of potential sites. Selection of the site

followed a review of relevant factors such as proximityto resources and

infrastructure including lignite, water supply, transmissionfacilities, natural gas

pipeline, rail, and surface transportation. Other factors in the selection of this site

were topography,land use, and availabilityof property. These factors combine

to make the site suitable for the proposed development.

The site is located adjacent to the proposed lignite mine. Siting the mine

and Plant adjacent to one another willeliminate long distance transportationand

its related infrastructure, resulting carbon emissions, and cost over the life of the

facility. Treated effluent from the city of Meridian wastewater treatment plants

will be used to supply the Plant's water requirements. Existing MPC

transmission lines are approximately twentymiles south of the site. Two natural

gas pipelines are near the site, one within approximately five miles of the site and

another on site. The site is primarily accessible via a 2-lane state highway

adjacent to the property.

The land where the Plant will be located is relatively flat with slight rolling

terrain. Current land use of the site and surrounding area is agriculture and

primarilytimberlandin a predominantly rural area. Approximately 150 acres of

the site are planned to be used in development of the Plant. An additional 100

acres willbe used for development of a reservoir for the treated effluent from

Meridian. Approximately 500 additional acres have been identified for long-term

ash storage. The site also includes an area for temporaryconstruction activities

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2.0 Site Description

such as equipmentstaging and laydown. A layout of planned facilities and a site

drawing are located in Appendix C.

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3.0 Fuels Overview

3.0 Fuels Overview

3.1 Lignite Mine Overview

The lignite being utilized tofuel the Kemper County IGCC Project wi!Ibe

mined from an area known as the Damascus Reserve. This reserve, in North

Lauderdale and Southwestern Kemper Counties is part of the Wilcox Formation,

a substantial lignite deposit stretching from South Alabama, throughCentral

Mississippi and into Western Tennessee. A map of the Wilcox Formation is

shown in Appendix D. Approximately sixty core drillings were performed by The

North American Coal Corporation (NAC), a subsidiary of NACCO Industries, Inc.,

under a mine pre-development agreement to determine the characteristics of the

Kemper County lignite reserves. The primary seam of lignite to be mined,

referred to as the "J" seam, has an average overburden depth of eighty feet and

contains almost 300 milliontons of recoverable lignite. The total lignite mining

area, referred to as the Area of Interest, will adjoin the Plant site and cover

approximately 31,000 acres. The surface mine willbe designed to produce

approximately 4.5 million tons per year. A map of the proposed mine site is

shown in confidential Appendix E.

3.2 Lignite Quality

The primary feedstock for the Plant willbe Mississippi lignite with the

following life of mine expected specifications:

Characteristics Standards

Moisture, % by weight 45.50%

Ash, % by weight 11.95%

Sulfur, % by weight 0.99%

CalorificValue, Btus/lb 5,290

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3.0 Fuels Overview

3.3 Lignite Miner Evaluation

MPC, with assistance from Energy Ventures Analysis, Inc. (EVA),

identified seven lignite miners believed to be capable of performing the scope of

mining services that will be required with the Project: American Electric Power

(AEP), Alcoa, BNI Coal, Kiewit, NAC,Texas Utilities (TXU) and Westmoreland

Coal Company. AEP and TXUare electric utilitiesthat operate lignite mines as

mine-mouth sources for coal units and do not perform mining services for thirdparties. Alcoa and BNI use lignite in metals production and also do not perform

mining services for third-parties. Kiewit, NAC and Westmoreland remained as

potential lignite miners for the Project.

Six criteria were used to finalize the selection process: (1) gasification

experience, (2) ash waste disposal experience, (3) mine-mouth experience, (4)

financial strength, (5) lignite handling experience, and (6) experience in mining in

Mississippi. With EVA's assistance, research was performed and discussions

were initiated with each supplier to obtain the information necessary to evaluate

these companies against the stated criteria.

NAC is the only potential supplier that met all six of these important criteria

and is the only lignite miner that has previous lignite mining experience in

Mississippi. After careful consideration, NACwas selected to be the mining

service provider and negotiations were commenced to finalize a

long-term

agreement. Appendix F is a summary of the results of this evaluation.

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3.0 Fuels Overview

3.4 Mining Contract

Negotiations for a Lignite Supply Agreement are underway with NACto

perform all mining activities associated with securing, mining, and delivering the

lignite to the Plant. This will include securing all necessary licenses and permits

required by law to perform a surface mine operation in Kemper County,

Mississippi. The Company has determined that a management fee contract

structure would provide the lowest overall price of lignite for the Kemper IGCC

Project. Under a management fee mining services agreement, MPC would own

the mine, all associated mineral interests, and all of the equipment and facilities

related thereto. NAC, utilizing its mining experience and expertise, would

perform all lignite mining activities associated with providing lignite to the Plant.

Under thistype of arrangement, the Company will pay the costs associated with

all mining activities and pay NAC a management fee based on the amount of

lignite actually delivered. The forecasted lignite costs over the life of the project

are shown in Appendix S.

NAChas extensive experience in mining lignite and currently is America's

largest miner of lignite, operating six surface mines, including one near

Ackerman, Mississippi.

3.5 Mine Operation and Lignite Transport

NACwilluse a variety of surface-mining equipment including a large

dragline, dozers, mining shovels and off-road haul trucks. Mining operations are

planned well in advance in accordance with a mining plan that must be approved

by the Mississippi Department of Environmental Quality (MDEQ). A Life-of-Mine

Plan willbe submitted tothe MDEQbut active permits will be limited tofive-year

increments. Haul roads and water-control measures such as diversion ditches

and temporary holding reservoirs are constructed and an initial pit, or "box cut", is

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3.0 Fuels Overview

opened to expose the lignite. Although several seams of lignite are present in

the Kemper mine, a majority of the lignite willbe produced from the "J-seam."

As the lignite is mined, reclamation activities are performed concurrently.

At full production, an area of approximately 252 acres will be mined each year.

Reclamation activities include restoring the land to its approximate original

contour and planting trees and/or grass.

Large off-road truckswilltransport the lignite from the mining area to the

truckhopper near the Plant using private roads developed for that purpose. The

lignite will be either offloaded into the truckhopper or onto the adjacent lignite

storage pile. To reclaim the lignite from the storage pile, a dozer willbe used to

"push" the stored lignite directly into the truckhopper. The lignite flows from the

truckdump hopper, througha primary crusher, then by conveyor to a secondary

sizer where it is reduced to minustwoinch. From there another conveyor

transportsthe crushed lignite to a storage barn where an approximately a five

day supply of lignite willbe stored and protected from the environment. The

lignite will then be conveyed througha weighing and sampling station, and willbe

delivered to the crushed coal silos which hold approximately 1,340 tons each.

The Plant willhave multiple lignite preparation and feed systems with sufficient

design capacity such that if one system is temporarilyout of service, the others

can be increased to meet operational needs.

3.6 Independent Review of Lignite Quantity and Quality

MPC retained Marston & Marston, Inc. to perform a review of NAC's lignite

quality and production data for the proposed lignite mine site. Their review of

NAC's test procedures, data and results showed that the tonnage and quality

were sufficient to meet the annual requirements for the life of the Plant. The

Marston & Marston review is shown in confidential Appendix G.

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3.0 Fuels Overview

3.7 Natural Gas Supply

The Project willutilize natural gas for start-up, shutdown, and as a backup fuel for the Plant. The natural gas will be delivered to the Plant through a

sixteen inch pipeline that runs approximately five miles east of the site. The

natural gas pipeline willbe sized such that it can supply the quantity of gas

necessary to run the entire Plant, however, firm transportationis assumed for

only the Plant's supplemental firingcapacity. A map showing the natural gas

supply pipeline is shown in Appendix H.

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4.0 Environmental

4.0 Environmental

4.1 Environmental Overview

The Plant has been designed with state of the art technologywhich will

reduce emissions and result in full compliance with the Clean AirAct and all

applicable regulations promulgated thereunder. The syngas cleanup processes

planned for this Project are an integral part of the overall process design and are

included not only as a means to reduce stack emissions, but reflect the best air

pollution controltechnologies available.In fact, the Project's emissions are low

enough that a MACT review is not required. This technologywill allow the

Company to demonstrate compliance with allowable Prevention of Significant

Deterioration (PSD) increments and Federal and State ambient air quality

standards.

4.2 Permit Requirements

The Mississippi Department of Environmental Quality (MDEQ)issued an

air permit for the Project on October 14, 2008, and a Construction Stormwater

General National Pollutant Discharge Elimination System (NPDES) permit was

received November, 13, 2007, both of which provide the environmental permit

approvals necessary to begin construction.

The Company, as part of its activities under the screening

and evaluation docket (now 2009-UA-0014, formerly 2006-UN-0581), conducted

a competitive solicitation for the twogas turbinegenerators necessary to burn the

plant's synthesis gas and produce electricity. This solicitation was necessany in

order to procure the long lead time gas turbinesto support the May 2014

commercial service date. The preferred bidder's gas turbine,while still in the

same "F" class, had different size and performance characteristics from what was

specified in the October 14, 2008, PSD permit (reference Appendix I to Exhibit

(TOA-1). The Company submitted an amendment to the PSD permit on

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4.0 Environmental

September 15, 2009, providing the updated specifications supplied by the

preferred gas turbine manufacturer. The PSD permit revision is in progress at

the MDEQand is expected to be issued in the Spring of 2010. The listing of the

Project's permits, licenses, corresponding agencies and expected approval dates

are outlined in Appendix J.

4.3 National Environmental Policy Act Review

The federal government has signified its commitment and priorityto this

Project throughthe award of a number of incentives. The economic evaluation

provided in the Company's filing, includes receiving both the Department of

Energy (DOE) Clean Coal Power Initiative (CCPI) funds and DOE Loan

Guarantees. Due to the Project receiving federal incentive dollars, a National

Environmental Policy Act (NEPA) review is required. This review process is

administered by DOE and addresses the cumulative environmental impacts of

the Project. The final NEPA approval is issued in the form of a favorable Record

of Decision (ROD) from the DOE. Before any disbursements of DOE incentives

can be received by the Project, a favorable NEPA ROD must be obtained. The

Company is currently anticipating receipt of the NEPA ROD in the spring of 2010.

4.4 Water Use and Plant Process Wastewater

The Kemper County IGCC facility will be a zero liquid discharge facilityno process water willbe discharged into any rivers or streams. Process

wastewater streams will be treated and recycled back to the combined cycle

cooling towerfor reuse, or evaporated and concentrated to form solid particle

cakes.

To provide makeup supply water to the cooling system to replace water

lost through evaporation, reclaimed treated municipal wastewater (graywater)

from twopublicly owned treatment works (POTWs) in Meridian, Mississippi, will

be used. Because the flowof reclaimed water from the Meridian POTWs varies

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4.0 Environmental

seasonally and to provide for weather related events, Mississippi Power is

planning to construct an approximately 1,500 acre-foot (ac-ft) surge pond on the

plant site to manage the supply of makeup water. A diagram of the proposed

water supply system is shown in Appendix R.

Rain water willbe routed from the site per State storm water runoff criteria.

Ash pile rain water runoffwillbe contained in an evaporation pond. A shallow

well will provide water for the site potable water system. Treatment willinclude

disinfection and other treatment and softening if required to provide a safe

drinking water source. Potable water from a local utilityis also available and can

be used as needed.

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4.0 Environmental

4.5 Carbon Capture

The Kemper County IGCC Project will capture and compress

approximately 65% of the Plant's CO2,enabling the CO2 ÍO be delivered to a

third-partyfor sequestration via Enhanced Oil Recovery (EOR). Approximately

25% of the CO2 is inherent in the syngas stream produced by the gasifier. To

capture the additional carbon required to reach a 65% capture level, additional

equipment referred to as a water-gas-shift (WGS) reactor, is added. The WGS

converts some of the remaining carbon monoxide (CO) inherent in the syngas

stream to CO2by injecting steam into the process. In addition, a process referred

to as SelexolTM iS applied to remove the CO2 Such that it is suitable for

compression and delivery to the sequestration and EOR process. All of the CO2

capture systems are installed prior to combustion of the syngas in the gas

turbines. Capturing CO2 pre-combustion is much more efficient and less costly

than post-combustion. The carbon capture equipment and processes proposed

in this Project have been in commercial use in the chemical industry for decades

and pose little technologyrisk.

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5.0 Engineering, Procurement and Construction

5.0 Engineering, Procurement and Construction

5.1 Safety Performance

Safety is a core value for MPC, SCS Engineering and Construction

Services (E&CS) and Southern Company. Proper planning that allows for safe

performance of work and the effective implementation of these safe work plans

are an expectation of all personnel who work on the Project.

Safety goals willbe planned around the E&CS Construction Safety

Program in conjunction with MPC's Safety Program and in such a manner that

personnel, community and corporate risks are minimized, thus avoiding any

adverse project cost and/or schedule disruptions. In addition, the contracts

awarded for installation willinclude safety specifications which require

construction industry safety best practices that, in many cases, are above and

beyond OSHA regulations including off-site safety measures as applicable. One

of the requirements listed in these specifications is that each installation

contractor's on-site staff includes a specified number of dedicated, full-time,

qualified safety professionals.

5.2 Engineering, Procurement, and Construction (EPC)

The process used to construct the Plant is referred to as EPC, or

Engineering, Procurement and Construction. The SCS E&CS organization

provides thisservice to Southern Company operating companies, including MPC.

As agent for, and in conjunction with the Company, they also serve the role of

Owner's Engineer, ensuring that factors such as land, the site, infrastructure,

training,and future operations are accounted for when undertaking the Project.

An EPC schedule for the Project is shown in confidential Appendix K.

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5.0 Engineering, Procurement and Construction

5.3 Engineering Design

The Plant can be viewed as consisting of twomajorsystem classifications:

the gasification island and the combined cycle block. The expertise for the

gasification island is shared between SCS and Kellogg Brown & Root (KBR),

who alone have the proprietary knowledge and technicalexpertise required to

design the gasification island. KBRis an international technology-based

engineering and construction contractor that has successfully completed more

than 5,000 projects in over 80 countries for more than 1,200 private enterprises

and governmental entities. KBR has extensive experience with syngas

production and was the original designer of the transport gasifier test facility at

the Power Systems Development Facility (PSDF) in Wilsonville, Alabama. The

expertise for the 2-on-1 combined cycle block lies within Southern Company,

which has successfully completed fifteen of these combined cycle units since

2000. Southern Company is also responsible for the integration required to tie

the gasification island and combined cycle block together. Therefore, SCS, as

agent for MPC, willhave primary design responsibility for the Project, along with

KBR, who has been co-developing the proprietary TRIGTM QBSiÍief With Southern

Company since its inception.

5.4 Procurement

The materials and equipment required for the Project will be procured

through MPC's Supply Chain Management (SCM), in conjunction with SCS

E&CS and SCS Supply Chain Management. Procurement for the Project will

range from commodities such as steel and concrete to the purchase of large

engineered major equipment such as steam turbines and air compressors. While

the former is purchased during construction, the latter, more involved equipment

must be purchased in advance of construction to allow timefor competitive

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5.0 Engineering, Procurement and Construction

bidding, manufacture and delivery in accordance with the Project's construction

schedule.

5.5 Construction Management

SCS E&CS has developed an overall construction strategy based

upon review of the conceptual design drawings and documentation and

prepared the preliminary schedule for the Project shown in Appendix K.

This strategy includes a crane and rigging plan; a site-use plan; and a plan

for contracting the work. E&CS will divide the work into various labor

inquiry packages in order to obtain bids from various, qualified installation

contractors. Examples of these packages include: survey,

communications and data cable installation, site preparation, access road,

lay-down yard and parking lot construction, road construction, building

construction, deep foundations, concrete, prime above ground contractor,

natural gas pipeline, graywater pipeline, and substation work.

Another critical piece of the overall construction strategy is the

contracting strategy, or determination of how the work will be bid and

performed. Determination of whether the work will be bid on a lump sum,

unit price, cost plus, time and materials, or cost reimbursable with a fixed

fee basis and whether the work willbe performed by an independent

contractor or labor broker greatly impacts project schedule, as well as

MPC and E&CS staffing requirements, and therefore impacts the project

cost estimate and cash flow.

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5.0 Engineering, Procurement and Construction

The construction strategy is tied directly to the time allotted for

detailed design and procurement activities. Because the four year

construction window is not of sufficient duration to allow all detailed design

to be substantially complete prior to bidding construction packages, it is

unlikelythat the entire project willbe bid on a lump-sum basis and

performed by one independent contractor. While this contracting

arrangement places the least amount of risk on MPC, it also may be more

costly as it contains contractor's profit and risk premiums. In the absence

of one prime contractor, E&CS and the Company are currently evaluating

the most effective method of bidding construction packages. It is

anticipated that the site preparation inquiries, which could include clearing,

grading, laydown area preparation, and/or ingresslegress road

construction, are expected to be issued to potential vendors late this year

or early 2010.

5.6 Cost Increase Mitigation

E&CS has a proven record of being able to manage costs using

techniques such as bulk procurement of commodity items such as steel and

piping, optimizing the burn of startup fuel, and negotiating performance based

contracts with General Contractors.

Large, complex, long-duration construction projects routinely encounter

cost escalations and unforeseen conditions. To mitigate these risks, the cost

estimate and economic evaluation of the Project included approximately $194

millionof cost escalation and $162millionof contingency. Inctusion of a

contingency is a normal, prudent cost estimating practice, to account for

unforeseen events such as weather delays, delays in equipment deliveries, labor

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Construction

turnover,etc. The contingency ín the Company's Project cost estimate is

approximately 6% of the total Project budget.

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6.0 Commissioning, Start-up and Operations

6.0 Commissioning, Start-up and Operations

6.1 Safety Performance in Generating Plants

Safety is a MPC Generation Department core value thatis an integral

component of everything we do and every business decision we make. Having

safety as a core value means that managing risks to employees, customers, and

the public takes precedence in our daily business. We work hard at MPC to

create a culture in which accident prevention and risk reduction are part of

everyday behavior. The words on the Target Zero logo, "Every day, every job,

safely", remind us that,as MPC Generation employees, we willmake sure that

we practice safety in everything we do.

As a result of our focus on safe behavior, it has been over nine years

since a lost time injury has been experienced at any of the MPC generating

plants. Also, for the past four years MPC has been awarded first place in "Total

Overall Safety Performance" by the Southeastern Electric Exchange.

6.2 Commissioning and Start-up

Commissioning and start-up plans, procedures, and schedules for the

systems and components willbe prepared during the Plant design process.

Detailed requirements and acceptance criteria will be provided for all new items

to be operated during the commissioning period. Each Plant system willbe

commissioned as its construction is completed and in accordance with the startup and commissioning plan. To ensure successful commissioning and start-up, it

is expected that a core group of the Plant's operations and maintenance staff will

be recruited, trained, and in position prior to the final twelvemonths of the

construction effort.

Additionally, Southern Company has announced an agreement to deploy

the TRIGTM technologyin China at a 120 MW power plant operated by Dongguan

Tianming Electric Power in Guandong Province (China TRIGIM Project). The

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China TRIG M Project is expected to be commercial in 2011. SCS Engineering &

Construction Services (E&CS) personnel will be providing design for the

gasification island and willbe involved with the actual start-up of the China

TRIGIM Project. The contractual arrangement stipulates that operational data

from the Tianming TRIGTM plant be collected and transmittedto SCS. These

direct design, start-up and operations learnings gained from the Chinese Project

willserve as added measures to assist with the commissioning and start-up of

the Kemper County IGCC Project.

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6.3 Operations

MPC's Generation department operates and maintains a fleet of natural

gas combined cycle units, cogeneration units, and pulverized coal units with

MPC employees; it is expected that the day-to-day operation and maintenance of

this (GCC Plant willalso be performed by MPC employees. Qualified engineers,

operators, technicians,and other labor necessary to operate the facilitywill be

selected and trainedfor theirroles. It is expected thatsome of the staff will be

hired locally; some willbe transferredfrom combined-cycle and pulverized coal

power plants operated by Southern Company subsidiaries and the PDSF facility;

and some willbe hired from the petro-chemical industry. Many willlikely be

trained at the PSDF.

The IGCC facilitywillbe operated and maintained for commercial

generation of electricity. As part of receiving DOE CCPI funds to advance the

TRIGTM technology,additional testingand characterization of the IGCC unit and

its equipment willcontinue during the first four years of operation. This is a

parallel activity to the commercial operation of the Plant, and wi!Inot interfere

with the Company's dispatch of the units to provide its customers with the lowest

cost of electricity.

6.4 Plant Staffing Summary

Appendix L contains a preliminary conceptual organizational chart of the

Plant. As the design process progresses, the Company willcontinue to develop

its organization and staffing plans. Initial Company staffing levels are assumed

to require approximately eighty employees to operate and maintain the Plant.

This staffing level assumes contract employees willperform the bulk of the work

during periodic scheduled outages, including gas turbine and steam turbine

overhauls in the combined cycle island.

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During the demonstration period, approximately fifteen additional

temporarypositions willbe filledto facilitate the required DOE testing, data

collection and report writing.

6.5 Availability & Post-COD Design Modifications

The Company's experience with power plants of all kinds is that

availability ramps up over time. To reflect this reality and avoid overstating

production cost savings in the early years, in the Company's economic analysis,

the availability of the IGCC alternative was ramped up over a period of seven

years from 59% to 89% with equivalent forced outage rates decreasing from a

high of 37% in 2014 to 5.2% in years 2021 through2053. A chart of the Project's

projected availability is shown in Appendix M.

In addition to the ramped availability, an additional Process Development

Allowance (PDA) of $46.5million over the first five years of operation was added

to the capital cost of the IGGC alternative. The PDA is common method,

borrowed from the petro-chemical industry, used to account for anticipated postcommercial operation modifications thatmay be needed to improve long-term

availability. The Company's goals are to take a long-term view of the Plant's

baseload operation and continually refine and improve the design and processes

used in the Plant. With the TRIGTM being a newer technology,the PDA allows

for systems design changes, equipment modifications, or other changes that may

make the long-term operations and maintenance of the Kemper IGCC more

economic or optimal. The $46.5million capital budget is scheduled to be spent

over the first five years of the Plant's operation, and is shown in Appendix N.

Much like the project contingency described previously, no reduction to the $46.5

millionPDA was made for the learnings from the China TRIGIM Project. The

PDA is to provide capital funding for any long-term design or operations

improvements, and whatever portion is unspent would not be charged to

customers and not included in the Project cost.

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6.0 Commissioning, Start-up and Operations

These monies are a risk mitigation factor used in conjunction with the

ramped availability to allow process and design improvements during the Plant's

early years to meet the projected availability.

6.6 Annual Operation and Maintenance Costs

The projected O&M costs and ongoing capital costs are presented in

confidential Appendix N. The variation in annual costs is a result of the required

maintenance schedule for the IGCC equipment. The primary driver in these

variations is gas turbinemaintenance. As is the case with existing combined

cycle units, the gas turbinesrequire significant maintenance every 25,000 hours

with a major portion of the replacement parts being capitalized. Secondary

drivers to these cost variations are steam turbineoverhauls and catalyst

replacement in the syngas cleanup equipment.

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6.7 Production of Saleable Products

During the process of cleaning the syngas after it exits the gasifier,

marketable sulfuric acid and ammonia saleable products are produced. This is in

addition to the CO2 capture previously described. Sulfuric acid and ammonia will

be transported offsite in trucks; both of these chemical products are safely

handled on a routine basis at many of the Southern Company generating plants.

The captured CO2 can then be compressed and delivered toa thirdparty for

sequestration via EOR. Below is a table showing the saleable products and the

expected quantities produced on an annual basis.

Table 3 - Kemper County IGCC Saleable Products

Gasification Process Saleable Products

Sulfuric Acid (H2SO4) ~130,000-139,000

tonslyear

Ammonia (NH3) ~17,500-21,000

tons/year

CO2 @65% capture ~3,500,000

tons/year

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7.0 Project Risk Mitigation

7.0 Project Risk Mitigation

7.1 ScottMadden Project Risk Study

In July of 2007, ScottMadden, a general management consultant firm, was

retained to provide a risk assessment of the Project. Their report and findings

focused on three areas of risk: Completion Risk, Operations Risk and Corporate

Risk. Risks associated with each area were identified and potential mitigation

strategies were provided. Supplementing the actual testing and development of

the PSDF, this report was one of the first Project risk management activities

undertaken, and provided the basis for several of the base-line Project

assumptions contained herein, such as ramped availability, early procurement of

major equipment, inclusion of an adequate contingency budget, the use of

incentives to minimize capital risk, use of performance guarantees from

equipment vendors, and anticipated construction and operational challenges

during the Project's first years. The Executive Summary from the Risk

Assessment is attached as confidential Appendix O.

7.2 IGCC Technology Comparison Analysis

Several gasification technologieswere studied and compared before a

decision was made to further evaluate TRIGTM technology.These include but are

not limited to the Shell coal gasification process, the GE (formerly ChevronTexaco) process, and Conoco-Phillips. Allof these processes, however, are

oxygen blown which require an air separation unit that adds expense and

inefficiency, and are "slaggers" which operate at higher temperature and melt the

ash into slag. Molten ash is highly corrosive, and as a result, these technologies

require significantly more maintenance than the TRIGTM technology. Mississippi

Power's parent, Southern Company, has compared air-blown to oxygen-blown

gasification and found that air-blown gasification is preferred for power

generation. The other technologieswere primarily designed to operate on

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refining wastes such as petroleum coke, not lower grade fuels such as lignite and

Powder River Basin coal.

7.3 PSDF Overview

The PSDF was established in 1996 to support the DOE's effort to develop

cost-competitive and environmentallyacceptable coal-based power generation

technologies. Located near Wilsonville, Alabama, the PSDF was designed at a

size that can be reliably scaled up to commercial applications.

DOE conceived the PSDF as the premier advanced coal power generation

Research and Development facility of the world, and work there thusfar has

fulfilledthis expectation. DOE's vision is that: "The Wilsonville PSDF willserve

as the proving ground for many new Advanced Power Systems. The Wilsonville

PSDF gives U.S. industnj the world's most cost-effective flexible test center for

testingtomorrow'scoal-based power-generating equipment. Capable of

operating at pilot to near-demonstration scales, the facility is large enough to give

industry real-life data, yet small enough to be cost-effective and adaptable to a

variety of industry needs."

A key feature of the PSDF is its abilityto test new systems at an

integrated, semi-commercial scale. Integrated operation allows understanding of

the effects of system interactions that are typicallymissed in nonintegrated pilotscale testing. This significantly advances commercial development of the

proposed technology. The semi-commercial scale at the PSDF also allows the

maintenance, safety, and reliability issues of a technologyto be investigated at a

fraction of the cost of testing at commercial scale. Development of advanced

power systems at the PSDF is focused specifically on identifyingways to reduce

capital cost and increase efficiency while meeting strict environmental standards.

The PSDF has developed testing and technologytransfer relationships

with many vendors to ensure that test results and improvements developed at

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the PSDF are incorporated into future plants. Major subsystems tested and

some highlights of the test program at the PSDF include:

• Transport Reactor

• Advanced Particulate Control

• Filter Fallsafe Device

• Coal Feed and Ash Removal Systems

• Syngas Cooler

• Syngas Cleanup

• Sensors and Automation

• Fuel Cell

• Combustion Turbine Burner

• Recycle Gas Compressor

• Fluid Bed Drying System

In May, 2009 the DOE announced the creation of a new National Carbon

Capture Center (NCCC) at the PSDF to develop and test technologiesto capture

carbon dioxide (CO2) from coal-based power plants. Southern Company will

manage the NCCC which will enable testing and analysis at a scale large enough

to provide meaningful data under real operating conditions. The NCCC will meet

a critical need of the Energy Department by serving as a test center for emerging

carbon capture technologies.

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7.4 PSDF IGCC Test Runs

To ensure the feasibility and reliability of the lignite feeding and handling

processes with Mississippi lignite, a 543 hour test run at the PSDF was

performed in 2007 using lignite mined from the Red Hills Mine in Ackerman,

Mississippi. The results of these tests showed that the Mississippi lignite

reserves in Choctaw and Kemper County exhibited high moisture levels,

requiring a more efficient drying process to avoid feeding and handling problems.

To demonstrate Mississippi lignite could be used effectively, SCS designed,

constructed and installed a fluidized bed coal dryer at the PSDF.

In early 2008, the Company conducted a 742 hour integrated test run at

the PSDF using lignite mined from the Red Hills Mine. This integrated test

combined all of the syngas production processes, including fuel drying, improved

handling and feeding systems, and production of the syngas in the gasifier. The

study showed extremely reliable operation of all phases of the gasifer-drying

the lignite, feeding the lignite into the gasifier, producing syngas in the gasifier,

and ash removal. The results of thistest demonstrated that the designed lignite

drying and feeding processes were effective and eliminated the feeding and

handling problems with undried lignite, producing extremely reliable operational

results.

In February, 2009, Mississippi lignite was again tested in a 510 hour test

with the highest lignite feed rate to date. This test run's objective was to gain

additional understanding and information on the operation of the TRIG= gasifier

using Mississippi lignite and, in particular, to help characterize a range of

operating parameters beyond the normal design conditions for the Project. The

gasifier, feeders, and ash removal systems were operated successfully across a

wide range of operating conditions, which further validates the Project's design.

This test confirmed that modifications to the coal preparation and feed systems

were successful.

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The tests demonstrated that the IGCC TRIGTM technologycan effectively

and reliably gasify Mississippi lignite. The test results of the 2007 test and the

executive summaries of the 2008 and 2009 tests are presented in confidential

Appendix P.

7.5 Independent TRIG Technology Review

MPC commissioned an independent technicalreview of the Plant design

by members of Southern Company's Research and Environmental Affairs

Department and Power Engineering Department. This group was uniquely

situated to assess the technicalrisks of the Project, given their vast engineering

knowledge in engineering electric generation facilities and theirindependence

from the engineering group tasked with designing the Plant. This review was

done internally to protect the proprietary nature of the TRIG= technology. The

Research and Power Engineering group's review concluded that the commercial

availability of the vast majority of the processes in the Plant and the successful

tests conducted at the PSDF resulted in a design that constitutes manageable

risk. A copy of the executive summary of thisreview is attached hereto as

confidential Appendix Œ

The Plant is comprised of commercially available equipment items, the

exceptions being the Transport Gasifiers, and the fine- and coarse-ash cooling

and depressurization systems. These systems are based on established design

principles, incorporate commercially available equipment items, and have been

successfully demonstrated at the PSDF.

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