In buyout, Texas
utility would limit coal plants
Feb 26, 2007 - International Herald Tribune
Author(s): Felicity Barringer And Andrew Ross Sorkin
Matthew L. Wald contributed reporting from Washington.
*
A team of private-equity firms has proposed a $45 billion buyout of
TXU on condition that the company, a Texas utility, abandon plans to
build 8 of 11 coal plants and commit to a broad menu of environmental
measures, according to people involved in the negotiations.
The roster of commitments came through an unusual process in which
the equity firms asked two prominent environmental groups what measures
could be taken to win their support. The result is an about- face from
the company's earlier approach to climate-change issues, and includes a
goal of returning the carbon dioxide emissions of TXU, long a bane of
environmental groups, to 1990 levels by 2020.
Environmental groups said Saturday that they had never known of a
financial deal with such an ambitious built-in environmental component.
Two private equity firms, Kohlberg Kravis Roberts and Texas Pacific
Group, have proposed to buy TXU in what would become the largest
leveraged buyout ever. The transaction was scheduled to be put to the
TXU board for a vote on Sunday. People involved in the negotiations said
that Goldman Sachs, an adviser and lender to the buyers, helped broker
peace with environmental groups and sought their support for the
transaction. Goldman Sachs has been one of the most aggressive firms on
Wall Street in taking action on climate change; the company sends its
bankers home at night in hybrid limousines.
For the investor groups, the effort was as much about making a sound
business decision to ensure the deal's completion as it was about any
environmental concerns. By bringing the environmental groups into the
process, the buyers may have helped avert years of costly litigation
over emissions from their plants.
But they might also have raised new questions about how they would
meet the energy needs that TXU intended to address by building all 11
plants.
Environmentalists said that they hoped that the TXU deal would
represent a turning point in the attitude of energy businesses as they
adjusted to what many anticipated would be a new regulatory and public
relations landscape in an era of climate change.
"We have history's largest purchase of a power company, with the new
owners wanting to move the company in a direction that is consistent
with a world that takes global warming seriously," said David Hawkins of
the Natural Resources Defense Council, one of the two environmental
groups invited to the negotiations. That group, and the other
participant, Environmental Defense, which often use the courts to
confront businesses, have been persistent critics of TXU. The
commitments highlight the uncertainty for utilities that are considering
building coal-fired plants. They do not know if such plants will be
protected by the Congress and excluded from future restrictions on
carbon-dioxide emissions, or whether anything they build now will have
to operate in a starkly different regulatory environment.
Under the plan, TXU would discard the plans for eight of 11 proposed
new coal plants, which would have been major new sources of emissions.
Those plants, which would have added more than 9,000 megawatts of new
capacity, the equivalent of 3.5 percent of current U.S. coal-fired
power, had been part of a planned $10 billion expansion of coal-fired
electricity.
TXU, based in Dallas, also intended to expand the renewable energy
portion of its portfolio and reduce or offset its emissions
significantly, said people who were familiar with the plans. Less than a
week ago, according to Fred Krupp, president of Environmental Defense,
the two environmental groups were approached by representatives of the
private-equity buyers. He said he had received a call from William
Reilly, a former Environmental Protection Agency administrator, who is
advising Texas Pacific Group.
Hawkins, who runs the climate-change program for the Natural
Resources Defense Council, said that the investment team was essentially
asking "what would it take" to gain environmentalists' support.
James Marston, who runs the Texas energy program for Environmental
Defense, called TXU's plans "a turning point in the fight against global
warming." Marston had led an intense advertising campaign painting TXU
as an environmental outlaw. But people familiar with the investors'
thinking took pains to say that the investors brought the measures to
the environmental groups, and were not acting out of any fear of the
groups' potential to wage a legal and public relations campaign against
them.
© Copyright 2007 NetContent, Inc.
Duplication and distribution restricted.
The POWER REPORT
PowerMarketers.com · PO Box 2303 · Falls Church · VA ·
22042
To subscribe or
visit go to: PowerMarketers.com
PowerMarketers.com@calcium.netcontentinc.net
|