NEW YORK (February 26, 2007) – The record-setting buyout of the giant electric utility TXU by top private equity investors sets a new benchmark in energy business strategy that will reverberate across the industry and throughout the corridors of Washington, according to experts from the Natural Resources Defense Council (NRDC), who were the first environmental advocates called to the table to help shape the pioneering environmental accord.
“This is the new standard by which new energy investments in this country are going to be measured,” said David Hawkins, a former top EPA official and head of NRDC’s climate program and the first environmental leader called by the buyers’ group to help craft the green aspects of the deal. “The smart money is now on clean energy and lower emissions. This is a breakthrough that will have lasting implications for future energy investments in this country and for the policymakers who set the rules of the road.”
Hawkins, who has spent more than 30 years working to clean up America’s electric utility industry, was behind one of the most important commitments by the new buyers: an agreement to jettison plans to for a costly and polluting fleet of coal-fired power plants in favor of a balanced strategy based on energy savings and clean energy technology, and to join the growing call for new national limits on heat-trapping global warming emissions.
Investors from Kohlberg Kravis Roberts & Co. and Texas Pacific Group say they will withdraw permit applications for eight of eleven pulverized coal power plants proposed in Texas. They also agreed to support a mandatory nationwide limit on global warming emissions paired with a market-based emissions trading system, and the plan to join the recently-announced U.S. Climate Action Partnership.
The new company will aim to limit its total CO2 emissions from its generating operations and reduce them over time, and pledges not to propose any additional traditional pulverized coal plants outside Texas.
“What we’re witnessing is the beginning of the end of investments in old-fashioned coal plants,” said Hawkins. “These are very big investors coming to the energy table with very big ideas about where the competitive market is heading. Strategies to fight global warming and save energy are crucial for anyone hoping to succeed in today’s electricity industry.”
The new investors also plan to invest $400 million in initiatives to help customers reduce their energy needs over the next five years, a strategy known as “demand-side management” (DSM), as a way to meet Texas energy needs while reducing the need to build expensive new generating capacity. The company will also expand its investment in energy generated from renewable sources including wind and solar, and take steps to increase its own energy efficiency.
The bidders say they will also begin to explore a variety of new coal generating technologies including integrated combined cycle gasification (IGCC) and flue gas/algae carbon capture. Finally, executive compensation and performance measurement at the new company would be tied directly to the climate protection goals. There will also be a new, impartial Sustainable Energy Advisory Board consisting of experts in carbon-neutral energy technologies, environmental policy, and Texas reliability standards.