Key Takeaways
- • Acme Equities, a New York-based hedge fund founded in 2012 with no prior power sector experience, has signed a letter of intent with the City of Farmington, New Mexico to potentially acquire Units 1 and 4 of the San Juan Generating Station for $1 and substantial tax incentives.
- • The 847-MW coal plant is slated for closure in 2022 by its current owners, including Public Service of New Mexico (PNM), due to inability to sell power at competitive market rates—a fundamental economics problem Acme would need to solve.
- • PNM CEO Pat Vincent-Collawn explicitly stated the utility will not purchase power from the plant under any circumstances post-2022 and is committed to exiting San Juan entirely as part of its energy transition strategy.
- • The City of Farmington negotiated the deal to preserve approximately 847 MW of generation capacity and the associated jobs and tax base, leveraging its 8.5% ownership stake in one boiler to assume full ownership if other utilities exit after 2022.
- • Acme's proposed strategy reportedly includes installing carbon capture and storage (CCS) technology, though the economic viability of retrofitting an aging coal plant with expensive carbon capture remains unproven and uncommercial at scale.
Summary
Acme Equities, a hedge fund founded in 2012 by Jason Selch, has emerged as an unexpected bidder for San Juan Generating Station Units 1 and 4 in Farmington, New Mexico, following the City of Farmington's announcement on February 23, 2019, that it had reached an initial agreement with the firm. The proposed acquisition price is $1, contingent on substantial tax incentives and regulatory support from local and state authorities. This development represents a last-ditch effort to preserve a coal generation facility that its primary owner, Public Service of New Mexico, is actively planning to retire in 2022 as part of a broader energy transition strategy.
The San Juan Generating Station has become uneconomic for its current operators because the power it generates cannot be sold at competitive rates in a market increasingly saturated with cheaper renewable and natural gas alternatives. The plant's 847-MW capacity, split between two units, employs a significant workforce and contributes meaningfully to Farmington's municipal tax base—motivations that drove the City to negotiate with Acme. Farmington holds an 8.5% ownership stake in one boiler and has negotiated a right to assume full ownership of the entire plant if the utility owners (PNM and others) elect not to continue operations beyond 2022. The agreement with Acme effectively transfers that assumption right to the hedge fund.
However, the deal faces formidable structural challenges. PNM CEO Pat Vincent-Collawn unambiguously rejected any scenario in which the utility would continue purchasing power from San Juan post-2022, stating in an investor call: "we're exiting San Juan, and we'll replace the power accordingly...we will in no way accept any sort of PPA or any continued involvement after 2022." This statement underscores that the plant's core problem—lack of willing buyers at economically viable prices—remains unsolved. Acme's proposed solution centers on retrofitting the facility with carbon capture and storage (CCS) technology, a costly and largely unproven commercial application for aging coal plants, and lobbying state legislators for support.
The engagement of Acme Equities—a hedge fund with no prior experience in power generation, transmission, or distribution—signals the degree of desperation among stakeholders seeking to preserve the facility. Acme's willingness to acquire the plant for nominal consideration reflects the highly distressed nature of the asset and the significant liabilities (decommissioning, environmental remediation, ongoing operational losses) that would accompany ownership. Whether the firm can successfully develop a carbon capture business model, secure long-term offtake commitments, and navigate the substantial capital requirements remains highly speculative and commercially unproven.
The San Juan Generating Station has become uneconomic for its current operators because the power it generates cannot be sold at competitive rates in a market increasingly saturated with cheaper renewable and natural gas alternatives. The plant's 847-MW capacity, split between two units, employs a significant workforce and contributes meaningfully to Farmington's municipal tax base—motivations that drove the City to negotiate with Acme. Farmington holds an 8.5% ownership stake in one boiler and has negotiated a right to assume full ownership of the entire plant if the utility owners (PNM and others) elect not to continue operations beyond 2022. The agreement with Acme effectively transfers that assumption right to the hedge fund.
However, the deal faces formidable structural challenges. PNM CEO Pat Vincent-Collawn unambiguously rejected any scenario in which the utility would continue purchasing power from San Juan post-2022, stating in an investor call: "we're exiting San Juan, and we'll replace the power accordingly...we will in no way accept any sort of PPA or any continued involvement after 2022." This statement underscores that the plant's core problem—lack of willing buyers at economically viable prices—remains unsolved. Acme's proposed solution centers on retrofitting the facility with carbon capture and storage (CCS) technology, a costly and largely unproven commercial application for aging coal plants, and lobbying state legislators for support.
The engagement of Acme Equities—a hedge fund with no prior experience in power generation, transmission, or distribution—signals the degree of desperation among stakeholders seeking to preserve the facility. Acme's willingness to acquire the plant for nominal consideration reflects the highly distressed nature of the asset and the significant liabilities (decommissioning, environmental remediation, ongoing operational losses) that would accompany ownership. Whether the firm can successfully develop a carbon capture business model, secure long-term offtake commitments, and navigate the substantial capital requirements remains highly speculative and commercially unproven.
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