Filed May 6 at the Federal Energy Regulatory Commission was an application from 4C Acquisition LLC (4CA), which plans to buy a stake in the Four Corners coal plant, for acceptance of its proposed FERC Electric Tariff.
4CA, a wholly-owned subsidiary of Pinnacle West Capital Corp. (PNW), is a newly-formed company that is in the business of directly and indirectly constructing, investing in, acquiring, and holding interests in electric generation facilities. 4CA is an affiliate of Arizona Public Service Co. (APS), which is a regulated utility under PNW.
4CA currently expects that it will acquire a 7% ownership interest in the Four Corners Power Plant on July 6, 2016. Four Corners is a coal-fired generating facility located on the Navajo Nation in Fruitland, New Mexico, that is currently owned by APS, Public Service Co. of New Mexico (PNM), Salt River Project Agricultural Improvement and Power District (SRP), Tucson Electric Power (TEP, and El Paso Electric (EPE).
In 2013, EPE notified the Four Corners participants that it intended to cease its participation in Four Corners when certain contracts expire on July 6, 2016. In connection with the desire of the other Four Corners participants to continue operating Four Corners after that date, APS agreed to purchase EPE’s 7% ownership interest in Four Corners on July 6, 2016. The terms of the associated Purchase and Sale Agreement (PSA) provide APS with the right to assign the PSA to an affiliate.
In addition, the PSA is subject to a Dec. 30, 2013, Option Agreement between APS and the Navajo Transitional Energy Co. LLC (NTEC), under which NTEC or its designee can elect to purchase all or a portion of the EPE ownership interest in Four Corners that APS (or its affiliate) acquires, or has the right to acquire, under the PSA. While the PSA obligates APS or its affiliate to acquire EPE’s interest in Four Corners on July 6, 2016, if NTEC elects to exercise its option, it can close on the transaction any time between July 6, 2016, and July 6, 2017.
On June 26, 2015, APS and PNW filed an application with FERC seeking all authorizations necessary under Section 203 of the Federal Power Act for two alternative transactions: APS’s purchase of EPE’s interest in Four Corners; or a PNW subsidiary’s purchase of EPE’s interest in Four Corners and subsequent sale of those interests to NTEC. The commission granted the requested authorizations on Dec. 22, 2015. On the same date, APS notified the commission that NTEC issued a press release announcing that it elected to exercise its option and indicating that it expects to close on its ultimate acquisition of EPE’s interest in Four Corners by July 2016.
Said the May 6 application from 4CA: “To consummate the transaction described as the Pinnacle West Transaction in the Commission’s Order, 4CA, a wholly-owned subsidiary of PNW was created and, as mentioned above, expects to acquire EPE’s interest in Four Corners and hold them for a short period of time (possibly up to one year), and then sell the interests to NTEC.”