Pinnacle West Capital Co. (PNW) , the Phoenix-based electric utility with a $7.9 billion market capitalization, has fielded approaches from strategic and financial suitors. But according to people familiar with the company, Pinnacle executives aren't interested in selling.

Two people familiar with the company said Canadian infrastructure fund Fortis Inc. has Pinnacle high on its utilities wish list, and Fortis would be interested in making a move after it digests Tucson, Ariz.-based UNS Energy Corp. In December 2013, Fortis agreed to acquire UNS in a deal valued at $4.3 billion and it closed on Aug. 15.

A spokesman at Pinnacle declined to comment; calls to Fortis were not returned.

One person familiar with Fortis said in November that the fund would be looking to acquire another utility in the Southwest in the next 12 to 18 months. The source had said Fortis was pleased that the deal only took nine months to close, whetting its appetite for more southwestern morsels.

Fortis has more than $25 billion in assets, and its 2013 revenue exceeded $4 billion. Its regulated utilities account for approximately 93% of its total assets, and they serve more than 3 million customers across Canada, the U.S. and the Caribbean.

That buyers have been knocking on Pinnacle's door is not surprising, as it is situated in the Southwest, which has seen an uptick in utility deals, in part because of the region's dramatic economic growth.

In addition to the Fortis-UNS transaction, Tampa, Fla.-based Teco Energy Inc. (TE) with a $3.8 billion market cap, went across the country and entered into an agreement in May 2013 to acquire New Mexico Gas Co. for $950 million.

Other companies in the Southwest that have been approached include El Paso-based El Paso Electric Co. (EE) , with a $1.6 billion market cap; Southwest Gas Corp. (SWX) , a natural gas distributor in Las Vegas, with a $2.9 billion market cap; and PNM Resources Inc. (PNM) , an Albuquerque, N.M.-based electric utility, with a $2.5 billion market cap.

Officials at El Paso Electric have said they are not interested in selling the company, but industry watchers note that it is a company in transition. CEO Thomas Shockley is set to step down at the end of his contract in December. Sources have said that Southwest Gas and PNM are committed to remaining independent.

The Southern electric stew was stirred anew on Jan. 28, when UBS issued a report stating that Pinnacle is a "prime acquisition target for larger-cap utilities." The report noted that a hypothetical buyer could acquire the company for as much as a 15% premium ($81 per share) and still achieve 5% accretion given the use of 10% parent leverage and 3% cost savings.

The report went on to note that "[w]hile the company still has a strong regulated growth profile and is likely to solve its net metering and cost shifting problems in 2017, we downgrade to Neutral as much of these solid fundamentals appear baked in."

Net metering enables customers with solar panels to lower their energy costs. Any excess kilowatts the customer generates are subtracted from the number of kilowatts they use when their monthly bills are calculated, which lowers the amount they pay to the utility. The utility then shifts the cost of the lost contributions to customers without panels.

On Jan. 27, Argus Research also downgraded Pinnacle to Hold from Buy.

Pinnacle is the parent company of Arizona Public Service, which serves about 1.1 million customers in 11 of the state's 15 counties It also has approximately 6,000 megawatts of generating capacity.

In addition, the company runs a small venture capital and investment firm — El Dorado Investment — and it owns SunCor Development Co., a developer of residential, commercial and industrial real estate.

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