NEW YORK - Arizona Public Service said late Wednesday Starwood Energy Group Global LLC terminated a long-term power purchase agreement on Starwood's proposed 290-megawatt concentrating solar power plant in Arizona.

Starwood and APS, a subsidiary of Pinnacle West Capital Corp, signed the deal in May 2009.

Starwood was to build the solar plant in the Harquahala Valley about 75 miles west of Phoenix. It would have provided power for some 73,000 Arizona homes.

Lockheed Martin Corp was the engineering, procurement and construction (EPC) firm for the Starwood project. APS said Lockheed Martin decided not to go forward with the project due to the size and the final risk profile of the EPC contract, among other factors.

APS did not disclose the cost of the project in the release. According to industry estimates, a solar thermal plant would cost about $5,000 per kilowatt or $1.45 billion for a 290 MW facility.

The facility would have occupied about 1,900 acres and include 3,500 parabolic mirrors that focus solar thermal energy onto a heat transfer fluid. The hot fluid would convert water into steam used to turn the plant's turbines to create electricity, much like a traditional power plant.

In addition, the plant would have used molten salt to store solar energy and continue producing electricity for up to six hours after the sun goes down.

Starwood's solar plant was the second large-scale solar project APS announced in the last 19 months.

APS said the first, Solana, continued to move forward. The financing for the 280-megawatt concentrating solar plant would likely be announced in the first half of 2010, APS said.

Abengoa Solar, a unit of Spanish multinational company Abengoa SA, would build the Solana solar plant 70 miles southwest of Phoenix near Gila Bend, Arizona.

To help meet its state imposed renewable energy mandate, APS said it was seeking to replace the energy from the Starwood Solar contract. APS planned to announce before the end of the year the results of two solicitations for renewable energy - one for small-scale generation projects and one for distributed generation.

Starwood Energy, an affiliate of Starwood Capital Group, is a private equity firm focused on energy and infrastructure investments.

Pinnacle West, of Phoenix, owns and operates about 10,000 MW of generating capacity, markets energy commodities, and transmits and distributes electricity to about 1.1 million customers in Arizona. (Reporting by Scott DiSavino; Editing by David Gregorio)

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