Pinnacle West Capital Corp. (NYSE: PNW) is making progress in buying the part of the Four Corners coal plant owned by Southern California Edison (SCE), with that deal from the SCE side getting a recent approval in California, said Pinnacle West Chairman, President and CEO Don Brandt during a May 3 earnings call.
Pinnacle West’s Arizona Public Service (APS) subsidiary already owns a piece of Four Corners and the SCE stake would add to that holding.
“The acquisition requires approval by Arizona, California and federal regulators and other government agencies,” Brandt said. “Noteworthy progress has been made in this regard. On April 18, the Arizona Corporation Commission authorized APS to proceed with the acquisition and to defer certain transaction related cost until the acquired generation is played into retail rates with a condition that the transaction may not close prior to December 1st of this year. The commission established a closing date parameter to reduce the cost impacts of the transaction on customers.”
In addition, the California Public Utilities Commission approved the transaction for SCE on March 29. Other conditions that must be met prior to closing the transaction include negotiation of a new coal supply contract, approval by the FERC, expiration of the Hart-Scott-Rodino waiting period and other typical closing conditions, Brandt noted. “We remain optimistic about our pending remaining approvals and completing the related required activities to allow the completion of our Four Corners plant in a timely manner,” he added.
The plan is to buy, for $294m (subject to adjustment), SCE’s 739 MW interest in Four Corners Unit 4-5, then shut 560 MW of capacity within Units 1-3 at the plant for clean-air reasons. APS would also need to spend about $300m for new emissions controls on the surviving coal capacity. APS owns 100% of Units 1-3. The shutdown of those units, plus the buy of the SCE interests, will reduce the plant’s overall generating capacity from 2,100 MW to 1,540 MW, and increase APS’s entitlement from the plant from 791 MW to 970 MW.
SCE, a subsidiary of Edison International (NYSE: EIX), is moving to comply with California greenhouse gas policy that essentially makes in-state utilities shed their interest in any coal-fired electricity being imported into the state.
The longtime, captive coal supplier to the Four Corners plant is the Navajo strip mine of BHP Billiton.
