The TXU deal

Here's the deal.

The proposed $32 billion buyout of Dallas power giant TXU will halt construction of all but three planned Texas coal plants, cut power prices for North Texas customers by 10 percent and put the company on a more environmentally friendly footing.

In a conference call this morning, TXU's management outlined the planned takeover led by private equity investors Kohlberg Kravis Roberts & Co. and Texas Pacific Group.

Shareholders will receive $69.25 per share for TXU from the group, which will then split the company into three divisions: one that will own and operate TXU's power delivery system, another to run the company's power plants, and a third business to sell power directly to residential and commercial customers.

The investor group will assume about $13 billion in debt.

A key component to the deal, which was approved by TXU's board of directors Sunday night, was the support of environmental groups that were putting up fierce opposition to the company's plans for 11 new coal plants.

The national group Environmental Defense agreed to settle its federal lawsuit against TXU regarding one of the new plants in exchange for an aggressive environmental pledge from KKR and Texas Pacific Group. The Natural Resources Defense Council also agreed to support the deal.

"To call this a watershed in the fight against climate change is accurate," said Fred Krupp, president of Environmental Defense. "In this case, where you have a Texas company agreeing to reduce its carbon levels from current levels back to 1990 levels tells us the utility sector sees we're moving into a carbon constrained world."

Sounds awfully good, but you know how that can go. Anything that has Tom Pauken and Glenn Smith both raising concerns (different ones, of course) is something that will require close monitoring. Sen. Troy Fraser, who as we know was not a big TXU fan, is also concerned.

I don't have much to say about this, so I'll link instead:

McBlogger is suspicious.

The Observer has some background, and Vince has some details.

RG Ratcliffe wonders if the deal means more nukes - he asked members of the Environmental Defense Fund about that and has a podcast of their responses.

Inside the Texas Capitol revisits his cap and trade pondering from last week.

And finally, the Burka/Kilday Hart tandem have these three posts that look at the deal from various angles.

Posted by Charles Kuffner on February 26, 2007 to Bidness