Still Plenty of Smoke to Be Cleared in TXU Deal
A press release has gone out announcing that the law firm of Steve Susman, the Houston-based attorney representing Mayor Laura Miller's Texas Clean Air Cities Coalition, has "successfully concluded its pro bono representation" of the coalition in its fight against TXU's 11 proposed coal-fired power plants in the state. As you no doubt know, TXU dropped seven of the plants when it announced it was being bought out by Kohlberg Kravis Roberts & Co. and Texas Pacific Group over the weekend. (The pair now has a new name, incidentally: Texas Energy Future Holdings Limited Partnership.) But TXU is moving ahead with three others, including Oak Grove in Robertson County, which will be a lignite-powered plant -- lignite being the dirtiest coal available. (It's like burning dirt, as one Friend of Unfair Park pointed out earlier this week. Yesterday, a federal judge gave TXU the OK to move forward with the plant.)
So, does this mean Susman -- who says he uncovered three inches' worth of docs revealing that TXU was paying off contractors and buying up turbines to lock out potential competitors offering cheaper and cleaner alternatives -- is off the case for good? Well, he isn't around to answer that question; Susman's in New York today giving a speech, says his assistant. But Unfair Park was told this morning that Susman's "in this for the long haul" and will remain involved in future legal action should TXU attempt to build the eight plants it has taken off the table, as it's made no formal agreement to keep from building the plants.
"If they don't have the buyout and don't withdraw the permits -- or if they do have the buyout and don't withdraw the permits -- we would absolutely jump back in and fight it," Miller tells Unfair Park. "We're also looking at Oak Grove. Austin is all upset now about the fact that a whole bunch of plants aren't going to get built except the dirty lignite plant that most affects them. I'm talking to [Austin mayor] Will Wynn tomorrow at 1 about this. There's a possibility if KKR and TPG doesn't change course on Oak Grove we might engage, and Susman is open to that. I mean, they're talking green but not acting green."
TXU, incidentally, also issued a press release in response to legislators' myriad concerns over the buyout and the company's promise to reduce rates. That's after the jump. But did you also know there are plenty of equity firms, investors and banks trying to top the buyout bid of $45 billion? Says here Credit Suisse has $51 billion with which to compete for the electric company. --Robert Wilonsky
KKR and TPG Reaffirm Commitments for New TXU:
o 10 Percent Price Cut
o Five-Year Investment Commitment
o No New Debt at Oncor
o Commitment to Continue PUCT Dialogue
Dallas, February 28, 2007 — Texas Energy Future Holdings Limited Partnership, the holding company formed by Kohlberg Kravis Roberts & Co., Texas Pacific Group and other investors, to acquire TXU Corp., has made firm commitments about price cuts, the length of time it will hold its interest in the company, the impact of the consummation of the transaction on rates and debt levels and continuing a dialogue with regulators.
As a result of this merger, the newly-privatized TXU has committed to deliver price cuts and price protection benefits to electric customers, strengthen environmental policies and make significant investments in alternative energy, conservation and efficiency measures to ensure the reliability and sustainability of the Texas power supply.
The investor group has listened to the concerns expressed by the Public Utility Commission of Texas (PUCT) and the distinguished members of the Texas Senate and House of Representatives, and would like to re-emphasize its commitment to the new TXU.
10 Percent Price Cut
As a result of the merger transaction with the investor group, TXU Energy will provide a 10 percent price reduction for residential customers in its traditional service area who have not already selected one of TXU Energy's lower priced offers. Additionally, TXU Energy customers entitled to receive the two remaining customer appreciation bonus payments of $25 per quarter will receive those payments. Customers will begin receiving a 6 percent reduction in approximately 30 days and the additional 4 percent reduction at the close of the transaction for a total reduction of 10%.
A Five-Year Investment Commitment
In the current regulatory system, the investor group will commit to hold a majority of its ownership interest in the company for more than five years.
No New Debt at Oncor to Finance the Transaction
There will be no new debt at Oncor, TXU's regulated transmission and distribution business, to finance this transaction. Furthermore, rates at Oncor will not increase as a result of the transaction. The Public Utility Commission of Texas continues to have complete authority over Oncor's rates.
Commitment to Continue PUCT Dialogue
Prior to the announcement of the transaction, the investor group talked individually with the commissioners of the PUCT to discuss the transaction and the new plan for TXU. It intends to continue open and productive discussions with the commissioners of the PUCT going forward, both before and after closing of the merger.
Texas Energy Future Holdings Limited Partnership is the holding company formed by Kohlberg Kravis Roberts & Co., Texas Pacific Group and other investors to acquire TXU Corp.. TXU Corp., a Dallas-based energy company, manages a portfolio of competitive and regulated energy businesses primarily in Texas. For more information, visit www.TexasEnergyFuture.com.