Power Engineering - TXU slashes build plans in acquisition

26 February 2007 -- TXU has agreed to take eight coal-fired plants out of its future generation plans in an agreement with investment companies Kohlberg Kravis Roberts & Co. (KKR) and Texas Pacific Group (TPG) for a $45 billion buyout that turns the Texas utility giant into a private company. Three other coal-fired plants will continue the construction process.

TXU and the investment group worked with two environmental organizations, Environmental Defense and Natural Resources Defense Council, in a major tactics change for the utility. Several environmental, business and political groups opposed the plants because of fears that they would cause ozone problems and exacerbate global warming. In another about-face, TXU has announced that it will support caps on greenhouse gas (GHG) emissions and reduce its CO₂ emissions to 1990 levels by 2020.

"This is a watershed moment in America's fight against global warming," said Environmental Defense president Fred Krupp. Environmental groups lauded the cancellation of the eight plants and the commitment to a federal cap on carbon dioxide emissions. The canceled plants would have added 56 million tons per year of CO₂.

The utility will more than double its purchase of wind power to more than 1,500 MW and promote solar power through solar/photovoltaic rebates. It will also keep its previous commitment to reduce mercury, SO₂ and NO_x by 20 percent from 2005 levels, through reductions at existing units and installation of emission controls on the new Oak Grove and Sandow units. TXU will reduce its own carbon emissions by increasing efficiency of its generating facilities by up to 2 percent.

TXU suffered recent setbacks in the permitting process for a majority of its plants. A state judge ruled against the utility's aggressive permitting schedule and an administrative court delayed the hearing on the permits by four months to allow opposition groups more time to organize arguments.

The coal-fueled units that TXU will continue to pursue are the two units at the Oak Grove site and one coal unit at the Sandow site. TXU said it does not intend to apply or reapply for permits to build additional coal units using current pulverized coal-fueled technology. The company has spoken out against other coal technologies, like integrated gasification combined cycle (IGCC), because the utility views them as unproven technology.

Under the merger agreement, TXU may solicit proposals from third parties through April 16, 2007. TXU's board of directors, with the assistance of its independent advisors, intends to solicit proposals during this period. TXU, KKR, TPG and the rest of the investor group expect to close the transaction in the second half of 2007, subject to receipt of shareholder approval and required federal regulatory approvals.

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