Groups Interested in Keeping Navajo Coal Plant in Operation

Peabody Energy on October 2 said several investors are interested in taking over the Navajo Generating Station in Arizona, a coal-fired power plant on tribal land whose current owners, including Salt River Project (SRP), voted earlier this year to close the facility. Peabody's Kayenta Mine supplies fuel for the plant.

Lazard Freres & Co., a Bermuda-based financial advisory and asset management firm, is leading the ownership transition process. George Bilicic, Lazard's vice chairman who heads the company's power group, on Monday said in a statement "we will continue an intense focus to develop a new ownership structure, working toward a final selection of investors and negotiating definitive agreements by the end of the first quarter of 2018."

The 2,250-MW Navajo plant began operating in 1974 and is considered one of the most efficient coal-fired plants in the U.S. Southwest. The plant, located in Page, Arizona, was authorized by Congress as part of a government trust for the Navajo and Hopi tribes, on whose land the plant is sited. The Kayenta Mine and the power plant are responsible for about 85% of the annual general fund budget for the Hopi, and about 22% of the budget for the Navajo Nation. The mine and the plant's workforce is almost entirely Native American.

The Navajo Nation Council in June of this year approved a lease extension for the power plant. The plant's owners-SRP, Tucson Electric Power, Arizona Public Service Co., and NV Energy-said they would continue to operate the facility through 2019 if the Navajo group approved a new lease by July 1. The owners earlier this year voted to shutter the plant, citing "rapidly changing economics of the energy industry," including low prices for natural gas that had made coal-fired generation uneconomic.

According to Platts, the Navajo Generating Station has been running at about an 80% capacity factor.

SRP officials have said they are ready to work with any potential buyer of the plant, but are continuing to look at decommissioning the facility in 2019. A spokesman for SRP said a non-disclosure agreement prevents naming any potential investors in the facility.

Mihio Manus, a spokesman for the Navajo Nation, told Arizona PBS that "Navajo Generating Station, along with Peabody, provides significant employment opportunities as well as a great amount of revenue flowing to the nation."

Peabody in a news release Monday said "development of the Navajo Generating Station was authorized by Congress and serves as a stable, affordable power source to move water across the state for the Central Arizona Project (CAP)." CAP officials, however, have said power from the facility is not cost-effective, and while it will continue to use power from the station, it will at some point look for alternative sources, which could include other resources at the Navajo facility. Environmental groups have said the plant, if it continues to operate, should be converted to a clean-energy project, such as wind or solar. Manus told PBS that solar is an option.

"The Navajo Nation has the perspective moving forward that we need to diversify our energy sources," he said.

-Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)

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