Southern Co. shareholders reached a settlement connected to the utility's abandoned 745-MW Plant Ratcliffe (Kemper County IGCC) project that will require certain corporate governance reforms, the company said March 18.
The proposed settlement agreement, preliminarily approved by the U.S. District Court for the Northern District of Georgia on March 11, includes an aggregate payment of about $4.51 million in attorney's fees and expenses to stockholders' counsel to be paid entirely by the company's insurers, as well as the adoption of corporate governance reforms by the company. The terms of the settlement are subject to final approval of the court and a hearing is scheduled for June 1.
Plaintiffs in the case, who filed on behalf of Southern Co. in both a federal derivative action filed in the federal court and a state derivative action filed in Gwinnett County, Ga., Superior Court, generally alleged that management, including current and former directors and officers of Southern, breached their fiduciary duties, wasted corporate assets, and were unjustly enriched by failing to exercise adequate oversight over Kemper County, Miss., coal gasification project, according to the settlement agreement.
Southern Co. disclosed the settlement agreement in a Form 8-K filing on March 18.
Southern Co. subsidiary Mississippi Power Co. eventually halted gasifier operations in 2017 and canceled the project, forcing the company to write off $6.4 billion in expenses. The project was intended to be a first-of-its-kind plant to employ gasification and carbon capture technologies at scale.
Plaintiffs argued that management failed to exercise oversight over the design, planning and construction of the plant; and failed to establish effective systems for monitoring and controlling design and construction, budget and schedule estimates, actual costs and schedules and mitigation plans to address problems, cost overruns and delays.
Those alleged breaches of duty may have exposed Southern to liability in a related securities fraud class action, and to civil or criminal sanctions in a "continuing investigation by the U.S. Department of Justice," plaintiffs said in the settlement agreement.
As part of the settlement agreement, the company agreed to adopt corporate governance reforms including better cost tracking for large capital projects, enhanced reporting and auditing processes, establishment of a chief audit executive, improved oversight and communication, executive compensation aligned with milestones and regulatory compliance for large capital projects, expanded terms for the company's compensation clawback policy, and improved education and training.
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