LOS ANGELES -- The Salt River Project has announced that fiscal 1991 saw the Phoenix-based utility incur its second operating loss in a row, mainly because of a write-off of its investment in a major coal-fired power unit.
The utility said it is charging off $203.7 million of the $268.7 million invested in Coronado Generating Station Unit 3, a coal-fired plant on which construction was suspended in 1988. The write-down, combined with the nonrecurring costs of a major reorganization, produced a $218 million loss in the fiscal year that ended April 30.
Salt River officials stressed that the write-down will not harm their creditworthiness.
"This is a onetime, noncash charge that will not affect either our rates or our bond ratings," Mark Bonsall, the utility's associate general manager for financial, information, and planning services, said in a statement released at the beginning of the month.
Mr. Bonsall said Salt River officials had discussed the write-off with the rating agencies, who "understand our decision and have assured us that [it] will not negatively affect our ratings."
Moody's Investors Service rates the utility's electric system revenue bonds Aa. Standard & Poor's Corp. rates them AA.
The utility -- known formally as the Salt River Project Agricultural Improvement and Power District -- said it will save customers $185 million over the long run by buying power from other sources, instead of completing and operating Coronado Unit 3.
Salt River suspended construction on the unit three years ago when a buyer's market for surplus power developed in the region. The district said at the time it was more economical to enter long-term power contracts with other suppliers than to continue building Unit 3, a proposed 350-megawatt plant near St. Johns, Ariz.
The Coronado Generating Station has two 350-megawatt units in operation, both owned by Salt River.
The third unit was originally targeted for service in 1982, but slow customer growth delayed the proposed start-up date to 1991. But in February 1988, after securing affordable long-term contracts for power purchases from other utilities, Salt River's board of directors suspended completion of the third unit until after the year 2000.
The decision to suspend construction was "viewed positively as a step in the right direction" because Moody's evaluates how a utility's management reacts to a "changing energy and economic environment," Adam Whiteman, an assistant vice president of the agency, said yesterday. The write-off was expected at some point, so it "doesn't have much of an impact at all" on long-term bond ratings, he added.
William Chew, a senior vice president of Standard & Poor's, called the write-down simply "an accounting action that followed a strategic decision" to suspend construction. Accordingly, the write-down itself was not "in any sense" a negative development, he said.
Salt River is trying to capture the $65 million residual value of Unit 3 by selling the turbine generator, boiler, and other major components.
The district reported an operating loss of $13 million in fiscal 1990, following a reorganization that pared the utility's work force. Severance payments in connection with the reorganization have contributed to the district's recent operating losses.