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American Electric Power Co. (AEP) and Southern Co. (SO) are pulling out of Futuregen, a U.S. government-backed project to capture and store the greenhouse-gas emissions from a coal-fired power plant, the companies' top executives said Thursday.

The companies, two of the biggest coal-burning utilities in the U.S., are exiting the Futuregen Alliance just weeks after it won renewed support from the federal government. The Obama administration earlier this month all but guaranteed almost $1.1 billion for the project, to be based in Mattoon, Ill., reviving a project that had suffered a major setback in early 2008 when the Bush administration backed out of funding plans after costs almost doubled. The companies' departure from the alliance was reported earlier by Bloomberg News.

The project envisions the building of a power plant that will capture and permanently store underground 60% of the carbon-dioxide emitted in combustion. This is down from the original aim to capture 90% of the plant's CO2 emissions. The plant would test the technology on a commercial level, a critical step in the face of likely federal climate change legislation that would limit greenhouse gas emissions.

"We've moved onto other projects," Southern Chief Executive David Ratcliffe said on the sidelines of the Edison Electric Institute conference in San Francisco. He said he told Energy Secretary Steven Chu that "I've had to devote my resources to other, more tangible projects that are moving faster," adding he still strongly supports the Futuregen project and Southern would share information with developers.

Southern will concentrate on two carbon capture and storage projects in Alabama, and a coal gasification project in Mississippi.

Likewise, AEP CEO Mike Morris said his company was going to devote its resources to other sequestration projects, including the Mountaineer plant in West Virginia. Morris said AEP would be capturing carbon there by this fall.

"It's going to happen a whole lot sooner than Futuregen," Morris said on the sidelines of the conference. He added, however, that he still supports Futuregen, noting the alliance's CEO, Michael Mudd, comes from AEP and AEP engineers would continue working on the Illinois project.

"AEP's decision to withdraw from the FutureGen Alliance is a financial decision and not an indication that the company does not consider FutureGen a worthwhile project," AEP spokesman Pat Hemlepp said in an email.

The remaining members of the alliance include U.S. and overseas coal companies, including Consol Energy Inc. (CNX), Peabody Energy Corp. (BTU) and BHP Billiton Ltd. (BHP) and utilities E.on AG (EOAN.XE) and China Huaneng Group.

-By Mark Peters and Cassandra Sweet, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com

(Christine Buurma in New York contributed to this report.)