Does the record-breaking purchase of TXU signal a new strategy for private equity?
Another week, another record-breaking private-equity deal. But the $45 billion purchase of TXU, a Texan energy utility, is fascinating not just because of the high price agreed by a gang of private-equity firms led by Kohlberg Kravis Roberts (KKR) and Texas Pacific Group. The preparation of the deal was as much about politics as the number-crunching and financial alchemy that are private equity's stock in trade. In essence, the buyers are betting that the increasingly sensitive question of how to produce energy in an environmentally acceptable way is better handled by a privately owned firm than by one exposed to the public markets.
In recent months TXU has become the bogeyman of green activists, thanks to its plans to build 11 old-tech, “dirty coal” power plants in Texas—and possibly more in several other states. Such plants belch carbon dioxide into the atmosphere, contributing to global warming, and produce other noxious substances. Protesters demonstrated last month outside the capitol building in Austin. The mayor of Dallas has led a coalition of Texas cities opposed to the new coal plants. And the governor of Texas, Rick Perry, was roundly criticised for trying to speed through the construction of TXU's coal plants, before being blocked by a state judge.
The new private-equity owners of TXU say they will adopt a radically different approach. Capitalism's legendary “Barbarians at the Gate”, made infamous by KKR's acquisition of RJR Nabisco in 1989, have become a bunch of tree-huggers.
See full Article.
Posts
