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Southern Company Generation – Fuel Overview – . Fueling the World's Best energy company ─ reliably and economically. Scott D. Clouse March 5, 2009. Presentation Overview. Southern Company at a glance Strategy and Coal Procurement Process 2009 Southern Company Outlook

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southern company generation fuel overview

Southern Company Generation – Fuel Overview –

Fueling the World's Best energy company ─ reliably and economically

Scott D. ClouseMarch 5, 2009

presentation overview
Presentation Overview
  • Southern Company at a glance
  • Strategy and Coal Procurement Process
  • 2009 Southern Company Outlook
  • Future Generation Growth
southern company at a glance
Southern Company at a glance
  • Four Electric Utilities
    • Georgia Power
    • Alabama Power
    • Mississippi Power
    • Gulf Power
  • Southern Nuclear
  • 42,000 MW’s of generating capacity
  • 4.3M customers
2008 coal metrics
2008 Coal Metrics:
  • Total Coal Cost: $5.1 B
    • Coal Commodity $3.3
    • Transportation $1.6
    • Taxes $0.1
    • Lease & Maint. $0.1
  • Coal Tons: 75.2 M
  • Coal MWs: 21,282
  • Coal Plants: 21
  • Coal Units: 65
  • Largest coal rail fleet in U.S. – excluding the railroads (either owned or leased): ~18,000 rail cars
slide7

Diversity of Coal Purchases 2008Tons and % by Region – 100% Ownership

PRB

37.8%

28.4 M Tons

Western

2.6%

2.0 M Tons

Illinois Basin

1.3%

1.0 M Tons

CAPP

31.3%

23.6 M Tons

Alabama

11.2%

8.4 M Tons

Southern Company

Coal Generation:

21 Coal Plants (65 units)

75.2 million tons 2008

Import – 15.7%

11.8 M tons

(Colombian & Venezuelan via Ports at Mobile, Charleston and Port Kraft)

* Data reported January – December 2008 Actual Receipts from FAACS

slide8

Rail Transportation

(Kraft is Ocean Vessel)

Barge Transportation

Southern Company- Transportation Diversity

Hammond

Bowen

Gadsden

McDonough

Miller

Yates

Gorgas

Wansley

Branch

Gaston

Scherer

McIntosh

Greene Cty.

Kraft

Mitchell

Barry

Crist

Scholz

Daniel

Smith

Watson

slide10

Actions taken to improve Southern’s Coal Supply Position

  • Increased diversification of supply sources as more Colorado, Utah, and Illinois Basin coals have been purchased for various plants
  • Test burns of Illinois Basin coals at some of the system’s non-scrubbed plants
  • Feasibility study of PRB conversions
  • Reviewing opportunities to blend PRB or Illinois Basin coal at various plants
  • Developing 3 million annual ton rail to barge loading capacity at Alabama State Docks (ASD) in Mobile, AL
  • Maintaining increased railcar fleet reserves to allow some non-traditional supply moves as constraints emerge
  • Constructed Gorgas transloader to support truck coal sourcing
slide11
Strategy and Coal

Procurement Process

Provide a reliable, low cost, environmentally acceptable fuel supply

slide12

Coal Procurement Strategy

  • Evaluate the entire value chain of fuel, transportation, operations and allowances to achieve the lowest reasonable total cost while meeting reliability and environmental requirements.
  • Five key risks identified and strategies to mitigate:

Volume:

      • Flexibility needed to adjust to burn fluctuations
      • Procure to guideline percentages based on the generation nature of the unit

Price:

      • Goal to be at market while mitigating significant swings
      • Typically 3 to 5 year contracts

Supply:

      • Seek diversity of supply regions and transportation modes
      • Blending coal opportunities

Reliability:

      • Creditworthiness
      • Replacement cost language

Environmental:

      • Incorporate non-negotiable Environmental Force Majeure language in ALL contracts
slide13

Coal Procurement Process

Interaction/Feedback/Inputs

OPCOs/

Plants

Railcar

Team

Treasury

NPV

Analysis

Long Term

(Mail)

Admin

Field Reps

Logistics

Strategic

Plan

Execute

Confirmation

(LOI)

Short List

Internet

RFP Posting

Initial

Screening

Projected

Need

Negotiate

Terms and

Conditions

Spot

(CIBS)

Delivered cost

evaluation

Execute Contract(s)

Paperwork

(FAACS, Comtrac,

P.O.’ s, etc.)

slide14

Railcar Cost

L&M

Freight Cost

CoalCost

EC GX

DE GX

Plant Fuel Handling

Coal Pile Inventory Carrying Cost

Environmental Costs (So2, NOx, etc)

EC GX

Total Cost Equation

= Total Cost of Process (Burn)

slide15

Total Cost Example by Component

Total with Sulfur= $106.65/ton or $4.44 per MMBtu

Subtotal before Sulfur= $100.65/ton

or $4.19 per MMBtu

Note: Assumes 12,000 btu/lb coal; 1% sulfur at $300/ton of SO2 for Plant X

evaluation of no x
Evaluation of NOx
  • Background:
    • Due to requirements of the Clean Air Amendments of 1990, all OPCo’s now include NOx in the delivered cost equation
    • NOx predictor model (EPRI/SoCo) includes all Southern Company coal units
  • Process:
    • Enter mine specific ultimate analysis into NOx predictor model
    • Evaluate to applicable unit(s)
  • Result:
    • The unit specific result is reported in lbs/mmbtu
    • This result is converted to a $/mmbtu result by multiplying by $/ton NOx cost

Example: Model result for Mine A to Plant X= 0.400 lbs/mmbtu

NOx allowance cost = $2,880/ton

0.400 lbs/mmbtu x $2,880/ton = $0.576/mmbtu

2,000 lbs/ton

slide17

Total Cost Example by Component (w/ NOx)

Total with Sulfur and NOx=

$120.44/ton or $5.02 per MMBtu

Subtotal with Sulfur= $106.65/ton

or $4.44 per MMBtu

Notes:

Assumes 12,000 btu/lb coal; 1% sulfur at $300/ton of SO2 and $2,880/ton for NOx for Plant X and assumes Plant X has no NOx controls.

2009 southern company outlook
2009 Southern Company Outlook
  • Decrease in coal burn
    • Natural gas
    • Economy
    • Environmental costs
  • Increase in Inventory
    • Strategically optimize system inventories to account for any overage
    • Carrying cost vs. avoided cost
  • Projected Purchases
    • 2009
    • 2010 - forward
slide19

Southern Company Generation

Coal Program Status as of January 9,2009

Tons X 1,000

Includes Co-Owners ; January 2009 DEPS Update

* Committed tons include options –this analysis includes projected burns and commitments that are in place.

future generation supply
Future Generation Supply

Nuclear – Vogtle 3 & 4 – Georgia Power Company

2,200 MW - ownership share is 45.7%

Certification ruling in March/April 2009, on-line in 2016 and 2017

Gas CC – Plant McDonough conversion – Georgia Power Company

500MW coal to 3 gas/oil CC units at 840MW each

Completed in 2012

IGCC – Kemper County – Mississippi Power Company

582 MW lignite mine mouth coal gasification plant

Carbon capture and sequestration capabilities

Certification ruling in late 2009, on-line in November 2013

Biomass – Plant Mitchell conversion – Georgia Power Company

96 MW – one of largest biomass plants in the country

Certification ruling in March/April 2009, on-line in June 2012

Lower fuel and operating costs when compared to continued operation using coal

Plentiful supply all within 100 miles, low transportation costs

Biomass – 5% co-firing being studied at many other system plants

conclusion
Conclusion
  • 2009 will continue to present challenges
  • Environmental costs will continue to have a negative impact on coal burn
  • No projected additional coal purchases this year
  • 2010 and beyond there are projected needs
  • Southern Company is continuing to investigate new generation sources