The Southern Company undertook to build a “clean coal” plant in Kemper County, Mississippi that would turn lignite coal into a synthetic gas to be used to power the plant. For a number of reasons, it was important that the plant be completed on time, and the complaint for this securities class action claims that the company repeatedly lied about its ability to meet the deadline, in violation of the Securities Exchange Act of 1934.
The class for this action is all persons who acquired Southern Company stock between April 25, 2012 and October 30, 2013.
The Southern Company is a utility holding company whose public utility subsidiaries include Georgia Power, Mississippi Power, Alabama Power, Southern Power, and Gulf Power.
The plant’s target commercial operation date (COD) was May 11, 2014. If it made this date, the company would received hundreds of millions of dollars in tax credits. If the plant did not proceed on time and on budget, it would not be able to pass construction costs on to rate payers, or the project might be canceled entirely. It was therefore important that the company be able to convince its regulator, the Mississippi Public Service Commission, that the project was on schedule.
Throughout the class period, the complaint says, the company insisted that the plant was “on schedule” or “on target” and that it would be on line on the COD. It said that the gasifier, a critical component, was proceeding “exceptionally well.” It even said the project was “halfway” finished or “70 percent complete” or “nearly 75 percent complete.”
However, these statements were false, the complaint claims. A later New York Times article, based on company e-mails, documents, recorded conversations, and interviews with a whistleblower, claimed that the company had “drastically understated the project’s cost and timetable” and was trying to conceal problems.
For example, the complaint claims that the company could not afford delays with the gasifier, but that in early 2012 it had problems that created a delay of three to six months, making the COD unachievable. Still, the company did not adjust its schedule projections.
In fact, the complaint claims that the company tampered with the budgeting and scheduling software for the project so that it no longer automatically adjusted the final price and estimated completion date for the project.
According to the complaint, even though the project would clearly not be completed in time, employees were ordered to say nothing about this or to lie. The company even forbid discussion of concerns in e-mail, since these could become public in the event of a court case.
At the filing of this complaint, three years after the COD, the plant is still not in commercial operation, and the complaint alleges that the gasifiers require years of work. The company has incurred other penalties relating to the late construction as well.