Nevada Power to buy Apex plant

Kevin Rademacher

Wednesday, June 22, 2005 | 10:52 a.m.

Officials with Nevada Power Co. said on Tuesday that the company will buy a 75 percent stake in the Silverhawk Power Station north of Las Vegas for about $208 million.

The Las Vegas utility will buy the majority stake in the plant from GenWest LLC, a subsidiary of Phoenix-based Pinnacle West Capital Corp. The deal is subject to regulatory approval from several bodies, including the Public Utilities Commission of Nevada and the Federal Energy Regulatory Commission.

Silverhawk is a 570-megawatt natural gas-fueled power plant located at the Apex Industrial Park, about 20 miles north of Las Vegas.

One megawatt is estimated to be enough power to serve about 750 homes.

Jake Mercer, a utilities analyst with Piper Jaffray & Co., said the move appears to be a good one for Nevada Power, particularly on the heels of the June 2004 purchase of a partially completed, 1,200-megawatt power plant from Duke Energy. The total cost to buy and complete the Chuck Lenzie Generating Station -- located near Silverhawk -- is estimated to be about $550 million. Construction is ongoing.

"These are prudent purchases," Mercer said. "Not only do you save the time it would take to build a plant from scratch, you save money. It's just one of those situations where everyone involved wins."

In a statement released Tuesday evening, Walter Higgins, chief executive of Nevada Power's parent company, Sierra Pacific Resources, said the acquisition of the power plant addresses a number of goals the company has established to more efficiently meet the needs of a growing Southern Nevada customer base.

"Acquiring this facility makes perfect sense as we continue executing our strategy to decrease our dependence on outside power supply sources, which ultimately reduces price volatility for our customers," Higgins said.

It was volatility in prices among those outside power supply sources during the 2000-01 Western energy crisis that plunged the company into financial distress.

Nevada Power currently generates less than half of the power needed to serve its peak summer load, which is expected to reach 5,100 megawatts this year, and demand is projected to grow at a rate of about 200 megawatts a year.

Higgins also said that the new plant will operate more efficiently, using less natural gas, for which prices have soared in recent years. Reducing the use of the company's older, less efficient power plants and buying less power on the open market from older plants are expected to save Nevada Power about $260 million over the next 20 years in natural gas costs.

The remaining share of the power plant is owned by the Southern Nevada Water Authority.

Pinnacle West spent about $400 million building the plant, which became commercially operational in May 2004, and the SNWA paid $91 million for its interest in the plant.

Based on an agreement unveiled in February, Nevada Power also will operate the SNWA's stake in Silverhawk. That eight-year deal was praised for giving 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.

SNWA officials have indicated that the sale of Silverhawk's majority stake would not affect its position in the plant.