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PLANNED PURCHASE OF GAS-FIRED GENERATION FACILITY
9 Months Ended
Sep. 30, 2014
Other Commitments [Abstract]  
PLANNED PURCHASE OF GAS-FIRED GENERATION FACILITY
PLANNED PURCHASE OF GAS-FIRED GENERATION FACILITY
In December 2013, TEP and UNS Electric, an affiliate of TEP, entered into a purchase agreement with a subsidiary of Entegra to purchase Gila River Unit 3 for $219 million, subject to certain closing adjustments. Gila River Unit 3, a gas-fired combined cycle unit with a nominal capacity rating of 550 MW, is located in Gila Bend, Arizona. TEP expects to purchase a 75% undivided interest in Gila River Unit 3 (413 MW) for approximately $164 million, and UNS Electric expects to purchase the remaining 25% undivided interest (137 MW) for approximately $55 million. In October 2014, the FERC issued an order authorizing the transaction. The closing of the transaction remains subject to certain other closing conditions and finalizing various closing documents. TEP and UNS Electric expect the transaction to close in December 2014.
In June 2014, TEP provided a letter of credit (LOC) for $15 million to the seller of Gila River Unit 3 to satisfy a condition of the purchase agreement. The seller is entitled to draw upon the LOC and apply such amount as liquidated damages if it has validly terminated the purchase agreement as a result of misrepresentations by TEP and UNS Electric or the failure of TEP and UNS Electric to close the transaction when the closing conditions have been satisfied. Upon the close of the transaction, the LOC will be canceled. In August 2014, Entegra filed a prepackaged Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. In September 2014, Entegra's Chapter 11 bankruptcy plan was confirmed. TEP does not expect the bankruptcy to impact the purchase of Gila River Unit 3.