Power plant goes bust
Lenders to operate Gila Bend merchant facility

Max Jarman
Feb. 2, 2005

The $1 billion Panda Gila River Power Station in Gila Bend is the latest casualty of a power boom gone bust.

Owners of the 2,100-megawatt plant capable of lighting a million homes have filed for Chapter 11 bankruptcy protection and are turning the huge facility over to a group of secured lenders.

The lenders are expected to continue operating the facility, which has contracts to supply power to companies in Arizona and Nevada. The 50 people employed at the plant are expected to be retained by the new owners.

The gas-fired plant was one of 20 such facilities proposed for Arizona in 2000 when the West was gripped by an energy crunch and electricity was selling for as much as $1,000 a megawatt.

The plants were supposed to deliver cheap electricity to consumers, but financial problems and a move away from deregulation got in the way.

Many of them, such as a plant planned by Allegheny Energy Inc. for La Paz County, never got built. They were canceled after other new plants came on line in 2002 and energy prices plummeted. Furthermore, state utility regulators altered deregulation rules and required utilities to rely on their own power plants instead of merchant facilities such as Panda Gila River.

"The competitive power market didn't emerge as everyone predicted," said Laura Plump spokeswoman for the plant's developer, Tampa's Teco Energy Inc.

Some of the plants that were built have been sold or are being sold at steep discounts.

Arizona Public Service Co. is buying a plant developed by PPL Corp. in Pinal County, and Salt River Project earlier bought Reliant Energy's Desert Basin plant in Casa Grande.

Others, such as PG&E National Energy Group's $500 million Harquahala power plant in western Maricopa County and now the Panda Gila River plant, filed for Chapter 11 and turned the facilities over to their lenders.

The Chapter 11 petition, filed in U.S. Bankruptcy Court in Phoenix by Panda Gila River Limited Partnership and three affiliates, lists $100 million-plus in both assets and liabilities.

Largest unsecured creditors include Teco Energy Inc., which is owed $190 million to develop the plant, as well as General Electric International and Franklin Mutual Series Funds, which are owed $48 million and $25 million, respectively.

Reach the reporter at max.jarman@arizonarepublic.com or (602) 444-7351.