PacifiCorp Makes Bid for Arizona Public Service Co.
PacifiCorp on Wednesday announced a $1.7-billion buyout offer for Arizona Public Service Co., the state’s biggest utility and the principal holding of troubled Pinnacle West Capital Corp.
Pinnacle West shares jumped sharply higher on the news, finishing up $1.75 to $9.75 a share on the New York Stock Exchange. Shares of Portland, Ore.-based PacifiCorp finished down 50 cents at $41.875.
Pinnacle West spokesman Steve Carr refused to comment on the offer but confirmed that it had been received.
Carr said the Pinnacle West board would consider the offer at a future meeting but he did not know whether it would be discussed at a board meeting scheduled for Nov. 15.
Arizona regulators also said they needed to study the proposal and indicated that they expected other offers to emerge.
Pinnacle West has suffered a sharp decline in its earnings due to troubles at its MeraBank subsidiary. The Phoenix-based federal savings bank has suffered increasing losses due to the softening Southwest real estate market and Pinnacle West must pump $180 million into the thrift to meet federal capital guidelines.
PacifiCorp, a Portland, Ore.-based holding company that has interests in electric utilities in seven Western states, said a buyout would benefit consumers in Arizona and states it already serves, because their varying periods of peak demand for power would lessen the need for new generating plants.
PacifiCorp offered to purchase APS’ 71 million outstanding common shares--all owned by Pinnacle West--for $1.7 billion. The utility has a reported book value of $1.95 billion, but is willing to write off or provide long-term amortization more than $200 million in deferred costs of its Unit Three reactor of the Palo Verde Nuclear Generating Station, said David F. Bolender, president of PacifiCorp’s Electric Operations Group.
APS owns part of the three-reactor Palo Verde, located about 50 miles west of downtown Phoenix. Other part owners include the Salt River Project in Arizona and other utilities in California, New Mexico and Texas.
PacifiCorp also would exchange APS preferred stock for equivalent PacifiCorp preferred stock or cash.
“We’re not offering to go after Pinnacle West. We’re offering a solution,” said Verl Topham, executive vice president of PacfiCorp electric operations. “We want this to be a very friendly transaction.”
