Southwest Generation

Southwest Generation (Southwest) operates seven power generation facilities in the United States (US). With facilities in California, Colorado, New Mexico and Nevada, the portfolio has an aggregate capacity of 974MW and consists of modern gas fired facilities operating under medium- to long-term contracts with major electric utilities.

The portfolio is a mix of simple and combined cycle plants with a capacity weighted average age, since construction, of less than seven years. As such the portfolio's facilities are efficient, low emission plants, which provide power to some of the fastest growing regions in south-western US.

Project update

Hastings Funds Management (USA) Inc. organised the formation of Southwest and led its successful bid for the seven facilities which were acquired in July 2008 from their previous owner, Black Hills Corp. It was during the six-month competitive bid and acquisition process that Hastings approached IIF BH Investment LLC ('IIF'), a subsidiary of an investment entity advised by JPMorgan Asset Management as a co-investor. They were selected due to the complementary management style of the fund and their long-term buy-and-hold strategy.

Southwest is structured as a jointly owned and controlled operating company between UTA, The Infrastructure Fund (TIF) and IIF. Southwest achieved financial close on 11 July 2008.

UTA acquired a 39.6 percent voting and 44.5 percent economic interest in Southwest. TIF (which is also managed by Hastings) acquired a 9.9 percent voting and economic interest, IIF a 44.5 percent economic and 49.5 percent voting interest, with the remaining minority interest being held by Zachry in their capacity as asset manager and provider of corporate services to the assets.

The acquisition included the portfolio's experienced team of 67 operators and plant managers and as such UTA can expect the continuation of the portfolio's impressive operational and financial performance. The portfolio also holds an excellent safety and environmental track record. 

The facilities were acquired for a total purchase price of US$840 million, which was invested as a mix of debt, equity and shareholder loans/notes. The investment in Southwest provides an attractive addition to the UTA portfolio given its returns and the geographic and revenue diversity it provides.