SRP to buy 625 MW of Mesquite plant from Sempra

The Arizona-based Salt River Project has agreed to buy one 625-MW block of the 1,250-MW Mesquite natural gas-fired power plant from a Sempra Energy (NYSE: SRE) subsidiary for $371m.

Sempra U.S. Gas & Power, a developer of renewable and natural gas power generation, announced the definitive agreement in a Dec. 26 news release. SRP will also become the operator of both Mesquite units.

The Mesquite station, which has been in operation since 2003, is located in Arlington, Ariz., about 40 miles west of Phoenix. Sempra said that Mesquite operates about 45% more efficiently than a standard natural gas plant.

SRP is the largest supplier of raw water to the greater-Phoenix metropolitan area.

The SRP Board of Directors approved a management proposal to acquire 100% ownership of the 625 MW block and a 50% undivided interest in the infrastructure facilities shared by the two blocks at the November board meeting.  The agreement is subject to approvals from the Federal Energy Regulatory Commission (FERC) and other regulatory agencies.  The companies anticipate receiving these approvals in the first quarter of 2013.

The Salt River Project said the extra generation would help it accommodate increasing load growth, while Sempra said the measure would decrease its merchant power market exposure.

“This strategic sale comes at the right time for Sempra U.S. Gas and Power as we continue to reduce our exposure to the merchant power markets, while also allowing us to put greater emphasis on growing our southeast natural gas portfolio,” said Jeffrey Martin, president and CEO of Sempra U.S. Gas & Power. “This transaction will enable us to redeploy capital to expand our growing presence in the natural gas sector,” Martin said.

“We studied the market very carefully and determined that this purchase would provide an economic benefit to SRP and its customers,” said SRP General Manager Mark Bonsall.  “Load growth is relatively small right now, but when it returns, this plant will position us well in the long term to meet our customers’ needs at a reasonable cost.”

The Environmental Protection Agency recently approved a regional haze plan that would require SRP to install selective catalytic reduction (SCR) controls three coal-fired plants: Apache, Cholla and Coronado.

SRP provides electricity to two million people living in central Arizona. It operates or participates in 11 major power plants and numerous other generating stations, including coal, nuclear, natural gas and renewable sources, such as hydroelectric, solar, wind and geothermal.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.