Key Takeaways
- • Acme Equities, a New York-based hedge fund with no power sector experience, has reached an initial agreement with the City of Farmington to purchase Units 1 and 4 of the San Juan Generating Station for $1, plus significant tax breaks, as of late February 2019.
- • The 847-megawatt coal plant, currently owned primarily by Public Service Company of New Mexico (PNM) and scheduled for retirement in 2022, faces structural headwinds: utilities cannot sell the plant's power at competitive market rates, the fundamental reason PNM is exiting the asset.
- • PNM CEO Pat Vincent-Collawn explicitly stated the utility will not purchase power from San Juan under any circumstances post-2022 and will not extend any involvement with the plant beyond its planned closure date.
- • Acme Equities, founded by Jason Selch in 2012, has pitched a plan incorporating expensive carbon capture technology as a potential pathway to solve the plant's economic viability problem and attract power buyers.
- • Farmington Electric, the municipal utility holding 8.5% of one boiler, negotiated an agreement to assume full ownership of the plant if other stakeholders exit, creating the contractual pathway for Acme's exploratory acquisition.
Summary
Acme Equities, a New York-based hedge fund with minimal track record in the energy sector, has emerged as a potential buyer for San Juan Generating Station's Units 1 and 4 in Farmington, New Mexico. According to an initial agreement announced by the City of Farmington on February 23, 2019, Acme is exploring acquisition of the 847-megawatt facility for $1 plus negotiated tax incentives. The transaction represents an unconventional effort to salvage a coal asset otherwise destined for permanent closure in 2022.
The plant's underlying economics present a formidable challenge. Public Service Company of New Mexico (PNM), the majority owner alongside other utilities, has determined that San Juan's power cannot be sold at competitive market prices—the core rationale driving the planned retirement. During an investor call, PNM CEO Pat Vincent-Collawn reinforced the utility's commitment to exit, stating unequivocally: "regardless of what theoretically has been proposed by Farmington, from our view we're exiting San Juan" and will not accept any power purchase agreement or continued involvement after 2022. This explicit rejection by the primary operator underscores the fundamental commercial obstacle facing any prospective buyer.
Farmington Electric, the municipal utility owning 8.5% of one boiler, holds contractual rights to assume full plant ownership from PNM and other stakeholders if they choose not to continue operations post-2022. This ownership pathway enabled the city to broker negotiations with Acme Equities. According to available term sheet details, Acme's proposal hinges on installing expensive carbon capture and storage (CCS) technology as a mechanism to enhance the plant's marketability and operational viability. The hedge fund's strategy appears premised on solving the power-pricing problem through technological differentiation rather than conventional utility operations.
Acme Equities was founded by Jason Selch in 2012 and operates as a holding company without established energy sector credentials. The firm's willingness to acquire a distressed coal asset at nominal purchase price reflects either contrarian conviction regarding long-term coal economics or confidence in carbon capture's commercial potential—positioning the deal as a speculative bet on both technological adoption and regulatory support rather than conventional power generation economics.
The plant's underlying economics present a formidable challenge. Public Service Company of New Mexico (PNM), the majority owner alongside other utilities, has determined that San Juan's power cannot be sold at competitive market prices—the core rationale driving the planned retirement. During an investor call, PNM CEO Pat Vincent-Collawn reinforced the utility's commitment to exit, stating unequivocally: "regardless of what theoretically has been proposed by Farmington, from our view we're exiting San Juan" and will not accept any power purchase agreement or continued involvement after 2022. This explicit rejection by the primary operator underscores the fundamental commercial obstacle facing any prospective buyer.
Farmington Electric, the municipal utility owning 8.5% of one boiler, holds contractual rights to assume full plant ownership from PNM and other stakeholders if they choose not to continue operations post-2022. This ownership pathway enabled the city to broker negotiations with Acme Equities. According to available term sheet details, Acme's proposal hinges on installing expensive carbon capture and storage (CCS) technology as a mechanism to enhance the plant's marketability and operational viability. The hedge fund's strategy appears premised on solving the power-pricing problem through technological differentiation rather than conventional utility operations.
Acme Equities was founded by Jason Selch in 2012 and operates as a holding company without established energy sector credentials. The firm's willingness to acquire a distressed coal asset at nominal purchase price reflects either contrarian conviction regarding long-term coal economics or confidence in carbon capture's commercial potential—positioning the deal as a speculative bet on both technological adoption and regulatory support rather than conventional power generation economics.
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