Firm narrows potential buyers for Arizona coal-fired plant

Flagstaff, Ariz. • An investment firm tasked with finding a new owner for an Arizona coal plant is focused mostly on an unnamed potential investor, but critics of the plant say talks to keep it open are a “wasteful distraction” that hinders future economic prospects for the Navajo Nation.

The Navajo Generating Station near Page is set to close in 2019 unless someone steps in to buy it.

A sale is considered a longshot as utilities increasingly move away from coal-fired power in favor of renewable energy sources and cheaper natural gas.

No new coal-fired power plants are being built in the United States, and 470 generating units have been retired since 2010. Nearly 160 more are scheduled to go offline through 2025, according to the environmental group CoalSwarm.

The Navajo plant is one of the biggest in the West and has a single coal supplier, Peabody Energy. The company has launched a campaign to save the 2,250-megawatt plant — along with its own mine — and hired Lazard Freres to lead the search for a new buyer.

George Bilicic, a vice chairman at Lazard, did not identify the potential investor during a congressional hearing Thursday on the Navajo Generating Station but said it’s a reputable company that operates power plants and has met with key players. The U.S. Bureau of Reclamation, which has a share of the power, said it’s working to prevent a shutdown.

Bilicic said prolonging the life of the plant would hinge on the willingness of current owners to buy power after 2019, a long-term lease with the Navajo Nation, a coal supply agreement and spending less to operate the plant.

Nicole Horseherder, a Navajo woman from Arizona, has urged Peabody to give up and not provide tribal workers with false hope.

The current lease with the Navajo Nation gives the tribe a good opportunity to transition to renewable energy, she said. It includes access to 500 megawatts of transmission capacity, a rail line, pumping stations and support for negotiating rights to Colorado River water.

That would be lost under a new owner, she said.

“Any discussions that hint at a future for NGS beyond 2019 are not based in any credible economic reality,” Horseherder said in prepared remarks. “They are an incredibly wasteful distraction to helping the Navajo build a better future.”

The Navajo and Hopi tribal governments, with budgets that rely heavily on the coal industry, want help from federal officials to keep the plant open and preserve hundreds of jobs for tribal members.

Both tribes have invested in solar energy, but the number of permanent jobs won’t replace those lost.

Congress chose to construct the power plant instead of building two dams on the Colorado River for hydroelectricity so that Arizona could move its share of river water through a canal system to the state’s most populous areas. The system also helps fulfill water settlements with Arizona tribes.

U.S. Rep. Paul Gosar of Arizona, who chaired Thursday’s congressional hearing, said he believes the federal government is obligated to maintain the plant until 2044 when its life was projected to end.

He also said the Central Arizona Project, which runs the canal system, must buy power from the Navajo Generating Station to help repay a $1.1 billion federal debt.

The Central Arizona Project says it’s under no such obligation and has other revenue sources for repayment. It recently agreed to hold off on seeking new energy sources until May but said it plans to have contracts for replacement power this summer.

The Central Arizona Project and the operator of the power plant, the Salt River Project, have said they would consider buying power from the Navajo Generating Station after 2019 if it makes economic sense.

The Central Arizona Project has relied on the power plant for as much as 90 percent of its power but its board said no single source would supply any more than 20 percent of the energy needs going forward.