OREANDA-NEWS. The Los Angeles Department of Water and Power will push for early retirement of one of the three units at the 2,250MW Navajo Generating Station as a condition of selling a 21.2pc stake in the Arizona power plant to public utility Salt River Project.

The board of commissioners of the Los Angeles municipal utility approved the sale yesterday, a week after the deal won approval from Salt River's board of directors. The early retirement of a 750MW unit at Navajo is not a categorical condition of the sale. The terms of the sales agreement dictate that Salt River, which operates the plant, "will use commercially reasonable efforts to cause [one of Navajo's units] to permanently cease operation by the end of 2019."

Navajo's designated retirement date, based on the plant's operational profile, is 2044.

The California public utility has to sell its stake in the plant because state CO2 mandates will not allow extending the long-term power purchasing

agreement with Navajo after 2019. The Los Angeles utility is buying 477MW from the plant, equal to its stake in the plant's capacity.

Los Angeles is giving up the stake in Navajo in exchange for \$10mn, land underlying the decommissioned Mohave Generating Station on the Arizona-Nevada border and Salt River's interest in the Eldorado transmission system forming part of a system of power lines connecting the southwest US to southern California.

The small sum received from the sale will be offset by up to \$32mn in Los Angeles' share of liabilities for future decommissioning, pension and final reclamation of the Navajo plant. The utility also will have to redeem \$59mn of tax-exempt debt allocated to financing the 40-year-old plant.

The utility and city attorneys say the deal still makes financial sense for Los Angeles. The power purchasing agreement with Navajo will end on 1 June 2016, three years before its expiration term. Los Angeles' share in operating costs at Navajo would have been \$509mn in 2016-19, according to the Department of Water and Power.

Los Angeles agreed to buy 55MW of geothermal energy from Salt River's rights in a project in southern California's Imperial Valley for \$80-\$90/MWh. Argus' southern California round-the-clock power assessments are \$37/MWh for the 2016-19 term of the agreement.

The sale paves the way for Salt River to proceed with a \$1bn project to implement upgrades required for complying with the Environmental Protection Agency's regional haze rule. The Los Angeles utility says the sale will help it avoid its share of the upgrade costs.

Salt River Project following the purchase will own 42.9pc at Navajo. The US Bureau of Reclamation owns a 24.3pc stake. Other owners include utilities Arizona Public Service with 14pc, Tucson Electric Power at 7.5pc and Nevada's NV Energy with 11.3pc.

The co-owners will have to embrace the terms of the sales agreement, including the closure clause. NV Energy plans to to sell its stake by 2019 to comply with Nevada state renewable mandates.