By Robert Mullin
The Valley Electric Association board of directors last week approved an agreement to sell the cooperative’s 230-kV transmission network to GridLiance for about $200 million.
The transaction, which still requires approval by two-thirds of Valley Electric’s members, is slated to close in late 2016 or early 2017.
Nevada-based Valley Electric is the only transmission-owning member of CAISO outside of California. The co-op serves 45,000 customers across a 6,800-square-mile service territory located along the southern Nevada-California border.
The deal will provide GridLiance with a foothold in an area that bridges the California market with the interior West.
“This transaction allows us to enter the region with assets located in a strategic area and with a utility partner with impressive foresight in developing the high-voltage transmission system as a gateway between California and the rest of the West,” GridLiance CEO Ed Rahill said.
Those assets consist of 164 miles of 230-kV lines linking Valley Electric’s base in Pahrump, Nev., with both Las Vegas and the Mead substation — a major delivery point for power wheeled into California — as well as substations along the length of the system. The co-op completed the network in 2013 in order to increase redundancy and improve reliability for its sprawling but sparsely populated service area.
The sale will return Valley Electric 2.4 times its investment in the system, which the co-op says significantly increased in value when it joined CAISO in 2013.
“At that time, our lines became a crucial part of the regional electric grid,” Valley Electric CEO Thomas Husted said.
Husted said Valley Electric sought a buyer for the system because “the premium earned on a sale would be so substantial that it far exceeds the rate of return we currently are earning.” The sale will allow the co-op to retire $82 million in debt and distribute $17.2 million in funds to active and former members who paid into the system. The co-op also plans to reduce its retail rates by 9.9%.
Under the terms of the sale, Valley Electric will still operate and maintain the system. The acquisition will not affect the co-op’s distribution system.
“This is a great moment for Valley Electric member-owners,” Husted said, referring to the agreement as a “partnership” with one of the country’s “foremost” transmission companies. “That’s the way GridLiance looks at it too: forming a relationship with our cooperative as they enter the Western markets. There are no downsides to this partnership.”
Launched in March 2015 with backing from the Blackstone Group, GridLiance bills itself as the nation’s first competitive transmission company focused on collaborating with public power entities. It made its first two acquisitions — 420 miles of 69-kV and 115-kV lines in Missouri and Oklahoma — a year ago. (See GridLiance Makes First Acquisitions.)
