UPP and PGR guarantee each other’s obligations under the credit facilities. In addition,
Trans-Union Pipeline and Gila River Pipeline, indirectly but wholly owned subsidiaries of the
Partnership, have constructed and own the gas pipelines for the projects, and guarantee the
respective project’s nonrecourse loans.
The Partnership is managed jointly through a management committee, which has four
members, two representatives and two alternates, with TPS and Panda each designating one
representative and one alternate. The management committee is primarily responsible for
approving the strategic objectives of the Partnership and providing direct supervision to the
Partnership.
Markets served
The Union Power Station will provide power to the Entergy, Tennessee Valley Authority
(TVA) and Southern Company subregions within the Southern Electric Reliability Council
(SERC), one of 10 electric reliability councils in the North American Electric Reliability
Council (NERC) and one of the eight regional councils in the Eastern Interconnect. At the
time of the project financing electricity demand in these subregions was expected to grow by
2 per cent per year up to 2009. The Entergy subregion, the power project’s immediate target
market, was estimated to require capacity additions of more than 10,500 MW between 2001
and 2010 if it were to cope with forecast growth and the expected retirement of older exist-
ing units, as well as to maintain a reasonable planning reserve margin of 13 per cent. In addi-
tion, with a heat rate advantage of about 30 per cent over the average existing plant the Union
Power Station was expected to displace or dispatch ahead of older, less efficient generation
in the target market.
The Gila River Power Station is located in the southwestern subregion of the Western
Systems Coordinating Council (WSCC), also part of the NERC. The plant was intended to
sell power primarily into the high-growth markets of Arizona, Nevada and southern
California. In Arizona load growth was forecast to grow by 2.7 per cent per year up to 2010,
and the project sponsors believed that factors such as a limited water supply and a rigorous
permitting process would create high barriers to entry for additional, competing power plants.
Access to the southern California electricity market is available through the Palo Verde trans-
mission hub in Arizona, a very liquid trading point in the WSCC.
Market diversity
The Union and Gila River projects are located in two separate and distinct power markets.
Not only are they geographically separated by more than 1,000 miles, but they are also locat-
ed in two separate nonsynchronous power grids, commonly known as the Eastern and
Western Interconnects. Each project is located within regional and local power markets that
possess unique climates, weather patterns, electricity customer demographics and load pro-
files. In addition, each market area contains a different mix of generating resources, with dif-
ferent proportions of generation fuels used to serve load and with different supply sources for
those fuels.
Some of the underlying factors that affect wholesale market prices, such as the installed
cost of new generation, commodity or traded prices for fuels, price trends for differing fuel
types and, in some cases, weather patterns, are considered likely to follow similar trends in
POWER PLANT