TXU shareholders approve buyout with green provisions

www.environmental-finance.com/
New York, 13 September:

Shareholders have approved TXU Corp's acquisition by a private equity group that has pledged to cancel coal plants and invest in clean energy.

On 7 September, shareholders of the Dallas, Texas-based company voted 340 million shares, or 74%, to approve the merger with Texas Energy Future Holdings Limited Partnership. TEF is a group of investors led by Kohlberg Kravis Roberts & Co (KKR) of New York and Texas Pacific Group (TPG) of Fort Worth, Texas.

TEF proposed the merger in February 2007, promising to cancel eight of 11 coal plants planned by TXU . Environmental groups had condemned plans to build 9,000MW of coal-fired power stations, but so had institutional investors, who feared future greenhouse gas regulation. Most accept the compromise that will see TXU build three plants totalling 2,200MW.

Those are under construction and should begin operating in 2009, said TXU spokesman Thomas Kleckner. They will incorporate 'super-critical' technology, which burns coal more efficiently than traditional, pulverised coal plants. TXU has also said it will build the plants so they can incorporate carbon capture and storage technology when it becomes available.

TXU is now soliciting contractors to build two Integrated Gasification Combined Cycle plants of probably 250MW each, Kleckner said. One will burn Texas lignite – a low-grade coal – while the other will burn low-sulphur coal from the Powder River Basin of Wyoming. These will capture carbon dioxide, which can be used for enhanced oil recovery in Texas, TXU has said.

In renewables, TXU's Luminant subsidiary signed an agreement in July with Shell WindEnergy to develop 3,000MW of wind capacity in Texas. They will explore using some of the power to compress air underground, which can be used later to generate electricity. This could overcome the complaint that wind is an 'intermittent' resource that is not always available when needed.

The prospective new owners said they would also increase TXU wind energy purchases and would invest $400 million in energy conservation. The companies expect to complete the merger in the fourth quarter of 2007. TXU shareholders will receive $69.25 in cash for each share of common stock held.