Emails reveal two potential buyers for Navajo Generating Station
FLAGSTAFF, Ariz. — The potential investors of a coal-fired power plant in northern Arizona have been identified as a New York-based firm that focuses on distressed companies and one of its subsidiaries in the utility business.
The Navajo Generating Station near Page is set to close in December 2019 unless a new owner is found, costing hundreds of good-paying jobs on the Navajo and Hopi reservations.
The investment banking firm Lazard Freres has been leading the search for a new buyer after being hired by the plant’s sole coal supplier, Peabody Energy, Inc.
The potential buyers were identified publicly for the first time this week as Avenue Capital Group and Deerfield, Illinois-based Middle River Power. The information came in emails between a Lazard representative and the general manager of the Central Arizona Project, who were trying to set up a meeting to talk about power purchase agreements.
The emails were shared by the Institute for Energy Economics and Financial Analysis, a nonprofit research group that has been following the coal industry. A spokeswoman for the Central Arizona Project confirmed their authenticity.
Lazard has said prolonging the life of the plant would hinge on the willingness of current owners and the Central Arizona Project to buy power after 2019, a long-term lease with the Navajo Nation, a coal supply agreement and spending less to operate the plant. The current owners decided to close it because natural gas was cheaper.
Arizona Gov. Doug Ducey signed legislation this week exempting coal used at the Navajo Generating Station from the state’s sales tax to make it more attractive for a new buyer.
There are mixed feelings on the Navajo Nation and the Hopi reservation over coal.
The industry employs hundreds of Navajos and Hopis, and the revenues provide a huge chunk of the tribe’s budgets. The U.S. Bureau of Reclamation, which owns a share of the power, has said it’s working to keep it open in part to save the jobs.
But the plant has its detractors because it is a major source of pollution on the reservation and its long-term viability is in doubt as utilities retreat from coal in favor of cheaper sources of energy and renewables. That’s led to a push by some on the Navajo Nation to convert the site to a solar plant.
Nicole Horseherder is among Navajos pushing for a transition.
“Wall Street hedge funds taking over on Navajo Nation would be a disaster for our people, for our culture, for our water and future,” she said. “These are called vulture capital companies for a reason. They aren’t in it for us.”
In the emails, Lazard representative Ali Taqi described the potential investors as “very reputable and experienced.”
Avenue Capital Group has assets of more than $9 billion, according to its website. Middle River Power owns five power plants that produce about 2,000 megawatts of energy. One is a coal-fired power plant outside Baltimore, Maryland, that Middle River purchased two years ago and has said would stop burning coal this summer.
The Navajo Generating Station alone generates up to 2,250 megawatts.
Both Lazard and Avenue Capital Group declined comment. An email sent to Middle River Power was not returned.
Navajo Generating Station is operated by the Salt River Project, which has shared financial and other details about the power plant with more than a dozen entities under non-disclosure agreements. Spokesman Scott Harelson said Friday that no potential buyers have entered into negotiations for the power plant.
“We do not have indications of any interest levels,” he said.
The utility has said it doesn’t see how anyone could run the power plant economically. And any investor that makes an offer after mid-May “will face significant challenges” in securing agreements needed to keep the plant open without a temporary shutdown, deputy manager Michael Hummel wrote in a letter to the Interior Department this week.
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