This week, we're taking a look at the enormous leveraged buyout of TXU Corp., the Texas utility giant, by a private investment group led by Wall Street powerhouse Kohlberg Kravis Roberts and Co. (see Tuesday's Tech Talk). Today, we'll review some of the early reaction from environmentalists, who, as one would expect, greeted the news with enthusiasm, characterizing the big takeover as a big deal.
The US $45 billion acquisition of TXU—a record in the equities market—provides up front that the new management will withdraw its proposals before Texas authorities to commission eight of 11 new coal-fired power plants over coming years. This concession immediately drew cautious praise from leaders in the environmental movement. Both the Natural Resources Defense Council and Environmental Defense, leading ecological advocacy organizations, were participants in negotiations that led to the transaction.
"This turnaround marks the beginning of a new, competitive focus on clean, efficient, renewable energy strategies to deliver the power we need while cutting global warming emissions," said Frances Beinecke, president of the NRDC. "It is a big step forward for the State of Texas and for the American energy economy as a whole."
In its own press release, the NRDC's chief climatologist, David G. Hawkins, said: "What we're witnessing is the beginning of the end of investments in old-fashioned coal plants. These are very big investors coming to the energy table with very big ideas about where the competitive market is heading. Strategies to fight global warming and save energy are crucial for anyone hoping to succeed in today's electricity industry."
The president of Environmental Defense, Fred Krupp, said his association viewed the compromise on carbon dioxide emissions reached in the deal as sufficient to settle a pending federal lawsuit against TXU. "The debate over this issue has been a top priority for Environmental Defense, and we plan to work just as hard with the new TXU to implement this agreement," he noted. Krupp added, in a separate statement, that he considered the occasion "a truly historic day in the fight against global warming."
Still, not all of those concerned with the quality of the environment were pleased by the deal. The Associated Press reported Monday that the Sierra Club related that it doesn't understand why TXU's new management would proceed with the three other pulverized-coal plants, including two near Dallas, in the face of strong opposition. That stance was echoed by Dallas Mayor Laura Miller, who leads a coalition of Texas cities that opposes TXU's coal facilities. She told the AP, "Environmental Defense blessed those two stacks when they don't have the authority to do that."
Tomorrow, we'll examine the question of just where the new TXU intends to find the resources to generate the electricity needed to meet demand that the old TXU wanted to produce with the eight coal power plants that now will no longer be built.