Arizona Public Service has agreed to buy, as of July 6, 2016, the stake that El Paso Electric has in the coal-fired Four Corners power plant.
On June 16, plant co-owner Public Service Co. of New Mexico filed with the new Mexico Public Regulation Commission a notice of this deal. It said that on June 4, it received a letter from El Paso Electric (EPE) regarding a notice of intent to assign EPE’s ownership and co-tenancy agreement interests in Four Corners Units 4 and 5 to Arizona Public Service (APS).
EPE’s letter states that it has notified the other plant participants that it will cease its participation in the Four Corners Plant when the facilities contracts expire with respect to EPE on July 6, 2016, and that EPE intends to assign, and APS intends to acquire, all of EPE’s participation interest in the Four Corners Plant. A Co-Tenancy Agreement provides that the plant co-owners, such as PNM, have a right of first refusal to purchase all or a percentage of the interests which EPE intends to assign to APS. If all the co-owners sign the June 4 notice, they would waive their first-refusal rights. PNM in the June 16 filing didn’t indicate whether it or any of the other co-owners would exercise that right.
Also attached to the June 16 filing is a copy of the sale agreement between EPE and APS.
El Paso Electric announced on June 16 its plan to exit the Four Corners stake as a way to get out of coal-fired generation and concentrate on low-CO2-emitting generation for the future. EPE, which has a 7% (108 MW) interest in the plant, said it will continue to work with the 93% co-owners and the Navajo Nation to facilitate their efforts to extend the operation of the plant beyond 2016.
As a part of a continued diverse generation portfolio going forward, APS at the end of 2013 completed a transaction with Southern California Edison to purchase that utility’s share of Four Corners Units 4 and 5, while closing the plant’s older, less efficient Units 1-3. Additional emission controls will be installed on the remaining units. With the closure of the three units, the plant’s capacity was reduced by 560 MW from 2,100 MW to 1,540 MW.
APS now owns 63% of Units 4 and 5. APS is the principal subsidiary of Pinnacle West Capital Corp. (NYSE: PNW). Other co-owners of Four Corners include the Salt River Project and Tucson Electric Power.