Sale of power plant possible

Kevin Rademacher

Wednesday, April 27, 2005 | 10:52 a.m.

The Silverhawk Power Station, located about 20 miles north of Las Vegas, could be up for sale.

A filing made Tuesday with the Securities and Exchange Commission by the plant's owner -- Phoenix-based Pinnacle West Capital Corp. -- said that the companies have received proposals from "several parties that have expressed interest in acquiring our ownership interest in Silverhawk."

The filing indicates that the after-tax proceeds of such a sale could be as much as $215 million, but documents also said that "no assurance can be given that the transaction will occur."

"We have a fiduciary responsibility to our shareholders and customers to evaluate any such proposals that come our way," said Alan Bunnell, a spokesman for Pinnacle West.

SEC documents show that the Las Vegas plant is the only so-called merchant plant the company owns that sells power on the open market. The balance of the company's resources are controlled by Pinnacle West's utility subsidiary Arizona Public Service Co.

Bunnell would not identify the companies that submitted purchase proposals.

Silverhawk is a 570-megawatt power plant located in the Apex Industrial Park. One megawatt is estimated to be enough power to serve about 750 homes.

Pinnacle West spent about $400 million building the plant, which became commercially operational in May 2004. The Southern Nevada Water Authority paid $91 million for a 25 percent interest in the plant.

Based on an agreement unveiled in February, Nevada Power Co. of Las Vegas will operate the SNWA's stake in Silverhawk. The eight-year deal would give the electric company more control over local power generation resources. The Water Authority, in return, will get 75 megawatts of firm power resources from the utility. The deal must still be approved by regulators.

SNWA officials indicated that the possible sale of Silverhawk's majority stake would not likely affect its position.

Sonya Headen, a spokeswoman for Nevada Power, said the utility "respectfully is not going to comment" when asked whether Nevada Power would be a possible buyer.

The most recent local power plant sale came in June 2004 when Nevada Power purchased a partially completed, 1,200-megawatt power plant from Duke Energy. The total cost to buy and complete that plant -- located near Silverhawk -- is estimated to be about $550 million. Construction is ongoing.

The move was hailed by utility regulators as an important step in reducing Nevada Power's reliance on buying power on the open market to meet peak customer demand. It was volatility in those market prices during the 2000-01 Western energy crisis that plunged the company into financial distress.

Nevada Power currently generates only about 40 percent of the power needed to serve its customers during peak summer demand.