A joint venture of KBR and Yates Construction is out as the primary builder of the Mississippi Power Co.'s $2.88-billion Kemper County integrated gasification combined-cycle project, and Performance Contractors is in, as the owner moves to rein in the project's costs.

Mississippi Power "has changed its execution strategy" for the Kemper IGCC project and determined it would be better for Baton Rouge, La.-based Performance Contracting to be the lead constructor as the project starts ramping up to its busiest phase, says Mississippi Power spokesman Jeff Shepard.

Shepard says the shift to Performance Contracting, scheduled for completion by week's end, "will help us ensure the overall efficiency of the project," whose estimated cost has risen roughly 20% since early spring. Shepard insists the Kemper project remains on schedule, with commercial operation of the facility scheduled to begin in May 2014.

Asked if the highly unusual decision to change the Kemper project's primary builder in the middle of the particularly complicated job was a reaction to the sharply rising cost estimate for the project in recent months, Shepard said, "I wouldn't say it was a reaction. The timing is what it is, but we're always looking for ways to reduce the project's cost."

In the past few months, the estimated cost of the Kemper project has risen to $2.88 billion from just under $2.4 billion. The high end of that range matches the "hard cap" the Mississippi Public Service Commission (PSC) said was the maximum amount the utility could recover from ratepayers.

Mississippi Power's request to raise its rates to recover the project's financing costs, as permitted by state law, was unanimously rejected by the PSC in late June. The Mississippi Supreme Court in late July ruled the utility cannot raise its rates on an interim basis until the court rules later this year on the utility's challenge to the PSC's decision.

Houston-based KBR plans to "demobilize" its construction-related operations at the Kemper site by Aug. 9, says KBR spokeswoman Marianne Gooch. She notes that KBR will continue to perform engineering and start-up services for the project. KBR and Southern Co.—Mississippi Power's corporate parent—co-developed the so-called "transport integrated gasification" technology the Kemper plant will use to gasify locally mined lignite. The resulting gas will fire a combined-cycle unit.

Shepard says KBR's BE&K subsidiary and Yates Construction "had approximately 400 craft and about 150 supervisory/staff positions on-site at the end of July. The craft are being interviewed for re-hire by the remaining contractor, along with any of the management/staff that want to stay on the project."

KBR and Yates "are taking the equipment that belongs to them, but this is a very small percentage as most of the equipment is rented. The remaining contractor or Mississippi Power will assume the contract for the rental equipment going forward," the utility spokesman says.

In a statement, Yates Construction said the company "is not the cause for any of the previous cost overruns that Mississippi Power has disclosed. Mississippi Power has actually requested Yates to increase its role in the project as it moves forward, not reduce it."