APS Energy Services Company Inc., a subsidiary of Pinnacle West Capital Corporation (PNW), has reached an agreement with NRG Thermal LLC, a subsidiary of NRG Energy Inc. (NRG) to sell its district cooling business.
District cooling systems distribute chilled water to multiple buildings for air conditioning, usually provided from a dedicated cooling plant. APS Energy Services owns and operates two cooling districts, Northwind Phoenix and Tucson District Energy.
APS Energy’s Northwind cooling system cools 33 buildings in downtown Phoenix, including Chase Field and the Phoenix Convention Center. Northwind also operates combined heat and power plants that provide chilled water, steam and electricity to portions of Arizona State University’s campuses in Tempe and Mesa. APS’ Tucson business serves a police and fire station in midtown and the Tucson Convention Center.
APS Energy’s decision to sell its district cooling system business is guided by its plan to focus on its core business of energy conservation and renewable energy contracting services going forward.
For NRG, the purchase is an ideal opportunity to expand its alternative energy business. The Northwind Phoenix nicely complements NRG’s existing thermal fleet and increases its presence in the Southwest.
NRG Energy has several divisions, including solar, nuclear and energy services, as well as its retail company, Reliant Energy. It has no generation projects in Arizona, but has several facilities in Nevada and California. Its primary power production is in Texas.
The transaction is expected to close in June 2010, subject to customary closing conditions. Pinnacle West expects to record a net after-tax gain related to the transaction in the second quarter of 2010.
Phoenix, Arizona-based Pinnacle West Capital Corporation provides electricity services in the state of Arizona, through its subsidiaries. The company is involved in the generation, transmission and distribution of electricity from coal, nuclear, gas and oil, and renewable resources.
Through its wholly-owned subsidiary, Arizona Public Service Company, Pinnacle West transmits and distributes electricity to roughly 1.1 million residential, commercial and industrial customers in 11 of the state’s 15 counties. The company derives a majority of its revenues from APS, which accounted for 96% in 2009.
Read the full analyst report on “PNW”
Read the full analyst report on “NRG”
Zacks Investment Research
