TXU Takeover: New Owners and New Environmental Policies?
What could be the largest private equity deal in history includes a pledge to clean up the company’s environmental policies.
By Margo Alderton
On Sunday, Feb. 25, a private equity consortium announced a $45 billion bid for Texas utility company TXU Corp. Included in the proposed buyout are plans to increase environmental measures, abandon the building of eight of 11 new coal plants, and cut TXU’s carbon-dioxide emissions to 1990 levels by 2020.
TXU has become highly profitable since a 2004 turnaround. However, its environmental practices have brought it under repeat fire from consumers, local communities, politicians (including the mayors of Dallas and Houston), and environmental and public watchdog organizations such as Ceres, Environmental Defense, Natural Resources Defense Council and Public Citizen.
The bid by private equity groups Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) is backed by Goldman Sachs, which, according to an article in The New York Times, helped broker an agreement with environmental groups Environmental Defense and Natural Resources Defense Council and sought their support for the transaction. Goldman Sachs has been one of the most proactive firms on Wall Street about climate change.
The Ceres investor coalition had issued a report Sunday about the financial risks that TXU investors face from the company’s original proposal to build new coal-fired power plants. In a press release, Mindy S. Lubber, President of Ceres and Director of the $3.7 trillion Investor Network on Climate Risk noted that “We are encouraged by recent news that TXU’s potential buyers are focused on mitigating these financial risks and scaling the project back.”
“If private equity investors buy TXU, it opens a new era in which private equity firms must evaluate climate risk just as public investors have been,” said David Gardiner, whose firm, David Gardiner & Associates, authored the report. Others on Wall Street seem to agree. Financial research firm Innovest Strategic Value Advisors and the National Environmental Trust (NET) held a press conference the day after the announcement to highlight how the plans to reduce TXU’s coal power plants may affect other firms with plans to build multiple coal-fired power plants.
Although the takeover and the accompanying environmental terms are not yet finalized, in an interview with Dallas Morning News, James D. Marston, Regional Director for Environmental Defense in Texas, noted, “It really is, I think, a watershed moment in America's fight against global warming.”
To learn more about the TXU deal, visit: