NEW YORK, April 13 (Reuters) - PNM Resources Inc. (PNM.N) signed a non-binding letter of intent to contribute the 305-megawatt Twin Oaks coal-fired power plant in Texas to its new unregulated energy company joint venture with Bill Gates’ Cascade Investments LLC.
PNM said in an April 12 filing with the U.S. Securities and Exchange Commission that the fair market value of Twin Oaks is about $554 million.
The filing said Cascade’s ECJV Holdings LLC subsidiary would make a cash contribution to the joint venture, temporarily named EnergyCo LLC, equal to 50 percent of the value of Twin Oaks (about $277 million), and the joint venture would then pay PNM a cash distribution equal to half of the value of Twin Oaks (about $277 million).
The 305-megawatt Twin Oaks coal-fired plant is located in Robertson County about 130 miles northwest of Houston. There are two units at the station, including the 152 MW Unit 1 and the 153 MW Unit 3, which entered service in 1990 and 1991.
PNM bought the Twin Oaks from a subsidiary of Sempra Energy, of San Diego, for about $480 million in April 2006 amid growing concerns about shrinking generation reserve margins in the Texas power grid.
PNM and Cascade each have a 50 percent ownership interest in EnergyCo, which the companies expect to enter into three businesses: competitive retail electricity sales; development, operation and ownership of generation assets; and wholesale marketing and trading.
In addition to purchasing energy-related assets, EnergyCo could grow by PNM contributing existing unregulated assets and Cascade, in turn, matching those contributions with cash.
PNM, of Albuquerque, New Mexico, owns and operates more than 2,700 MW of generation, markets energy commodities and transmits and distributes electricity to more than 800,000 homes and businesses in New Mexico and Texas and natural gas to almost 500,000 customers in New Mexico.
Cascade Investment LLC, of Kirkland, Washington, oversees the personal investments of William Gates III and the investment assets of the Bill & Melinda Gates Foundation.