Company agrees to buy back half of Oregon power plant

Avista Corp. announced Friday it has entered into an agreement to buy back half of a natural gas-fired power plant from bankrupt Mirant Corp. for $62.5 million.

If the sale is completed, Avista will own all of Coyote Springs II in Boardman, Ore., which can generate 280 megawatts of power, enough to energize 182,000 homes. Due to Mirant’s bankruptcy, the sale will be subject to auction and must be approved by the U.S. Bankruptcy Court and the Federal Energy Regulatory Commission. The deal is scheduled to close later this year or early in 2005, Avista said in a news release.

Avista bought the rights to develop the plant from Enron in 2000 for about $60 million. Avista sold half the rights to Mirant in October 2001 to bring in some needed cash during the energy crisis, company Spokesman Hugh Imhof said. Avista and Mirant split the $180 million to $190 million cost of developing the remainder of the plant.

Imhof said the plant is worth about $300 million, so buying half for $62.5 million is a “good deal.” The price was right and the additional power will help Avista meet its customers’ future resource needs, he said.

Coyote Springs II is fully operational now, following the replacement of its main transformer. It failed in January and required a shutdown until Sept. 7, when the plant came back on-line. An additional transformer is being built and will be kept as a backup to minimize future interruptions, the news release said.

Avista Utilities President Scott Morris said in July that the purchase of the half of Coyote Springs “would probably dictate us taking a real hard look” at whether Washington rates should be raised. In August, Avista filed a request with Washington regulators to increase natural gas, but not electric, rates. That proposal is currently pending.

Imhof said, however, that due to the way the company is amortizing its payoff of the plant, this purchase should not impact rates.

Business writer Alison Boggs can be reached at (509) 459-5491 or by email at alisonb@spokesman.com.