TXU merger: what does it all mean?
Feb. 27th, 2007 09:51 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
openspace4lifeI've ranted before about the worrisome trend of mergers producing larger, more powerful corporations with less and less in the way of real competition. Now, two huge private equity companies have decided that TXU, the utility company that's been in the news lately because of its plans for 11 new coal-fired power plants, would make a good investment. So good, in fact, that they're buying it out to the tune of 45 billion dollars, the largest leveraged buyout in history. A recent article in the New York Times called this move "a huge financial endorsement of the company’s energy strategy. . . . TXU has been the most aggressive in the power industry in pushing coal as the answer to growing electricity demands. Nationwide, power companies are planning to build about 150 coal plants over the next several years."
But that's not the whole story. In fact, according to another Times article (purchase required for viewing), "Within TXU, the controversial plan to build a raft of coal plants had become so damaging to its stock price that its board had been privately weighing a plan to scrap part of the project," and that was actually what made them more attractive to the private equity firms, "Kohlberg Kravis and Texas Pacific, which look for undervalued companies and try to turn them around." And the way they aimed to do it was by turning TXU's development plans around to the extent that green advocacy groups, Environmental Defense in particular, would actually endorse the buyout.
Is it just greenwashing? Maybe, in some sense. Still, it's hard not to be amazed at the magnitude of the change. Three of the coal plants were already under construction, but the other eight will be scrapped. And TXU is joining the U.S. Climate Action Partnership, which is a coalition of big corporations (and a few environmental groups) that is actually calling for mandatory caps on carbon dioxide emissions. (The idea being that one uniform rule is easier to deal with than patchwork state and local regulations, and negotiating one now will be better than taking the bitter pill of a much stricter law that might be passed by an unsympathetic government after warming has gotten even worse.)
But that's not the whole story. In fact, according to another Times article (purchase required for viewing), "Within TXU, the controversial plan to build a raft of coal plants had become so damaging to its stock price that its board had been privately weighing a plan to scrap part of the project," and that was actually what made them more attractive to the private equity firms, "Kohlberg Kravis and Texas Pacific, which look for undervalued companies and try to turn them around." And the way they aimed to do it was by turning TXU's development plans around to the extent that green advocacy groups, Environmental Defense in particular, would actually endorse the buyout.
Is it just greenwashing? Maybe, in some sense. Still, it's hard not to be amazed at the magnitude of the change. Three of the coal plants were already under construction, but the other eight will be scrapped. And TXU is joining the U.S. Climate Action Partnership, which is a coalition of big corporations (and a few environmental groups) that is actually calling for mandatory caps on carbon dioxide emissions. (The idea being that one uniform rule is easier to deal with than patchwork state and local regulations, and negotiating one now will be better than taking the bitter pill of a much stricter law that might be passed by an unsympathetic government after warming has gotten even worse.)
