Sale of Bright Canyon Energy

9 Months Ended

Sep. 30, 2023

Discontinued Operations and Disposal Groups [Abstract]

Sale of Bright Canyon Energy

Sale of Bright Canyon Energy

On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which we agreed to sell all of our equity interest in our wholly-owned subsidiary, BCE, to Ameresco. The transaction is accounted for as the sale of a business and is structured to close in multiple stages that are expected to be completed by the end of 2023, or a later date as permitted by the agreement. Certain investments and assets that BCE held as of September 30, 2023, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to PNW Power, a newly-formed, wholly-owned subsidiary of Pinnacle West. The BCE Sale does not include a $31 million equity bridge loan relating to BCE’s Los Alamitos project, which was paid in full by Pinnacle West on August 4, 2023. Other than these retained investments and the debt instrument, all the BCE assets and liabilities are included in the BCE Sale and are expected to transfer to Ameresco as a result of the BCE Sale.

The first stage of the BCE Sale closed on August 4, 2023, with the carrying value of net assets transferred to Ameresco totaling $44 million, which included a $36 million construction term loan. See Note 3. The assets and liabilities transferred in this stage related to the BCE Los Alamitos project and were previously primarily classified as construction work in progress and current maturities of long-term debt, respectively. Our Condensed Consolidated Income Statement for the nine months ended September 30, 2023, includes a pretax gain of $6 million relating to this stage of the BCE Sale reported within other income.

As of September 30, 2023, our Condensed Consolidated Balance Sheets include $32 million of assets classified as held for sale, relating to the remaining assets of BCE that are expected to transfer to Ameresco in the second stage of the sale. These assets held for sale include BCE’s investment in the Kūpono Solar project, and other projects in various stages of development. The completion of the second stage of the BCE Sale is subject to various conditions precedent, including third-party consents. Prior to being classified as held for sale, these assets were primarily included in the other assets line item within the investments and other assets section on our Condensed Consolidated Balance Sheets. We measure assets held for sale at the lower of carrying value or fair value less cost to sell. For the nine months ended September 30, 2023, no impairment loss was recognized related to the assets classified as held for sale.

As of September 30, 2023, the Condensed Consolidated Balance Sheets include a $34 million note receivable from Ameresco relating to the initial stage of the BCE Sale, which is due by January 2024. The BCE Sale also provides for Pinnacle West to purchase approximately $28 million of investment tax credits that may be generated by the assets included in the BCE Sale from Ameresco by January 2024.