by Edward Klump (Bloomberg)
TXU Corp., the Texas power producer that agreed to be sold in the largest-ever leveraged buyout, still faces opposition from environmental groups after scaling back expansion plans to win support for the deal.
Tom Smith, director of Public Citizen's Texas office, said he's seeking a two-year moratorium on construction of power plants fueled by pulverized coal. His comments followed a pledge by TXU to cancel eight of the 11 new coal-fueled generators it was planning and to support mandatory U.S. limits on power-plant emissions linked to global warming. The buyers still plan to build ``the three dirtiest plants in their proposal,'' Smith said today on a conference call with reporters.
At stake is TXU's plan to lift profit by selling more low- cost electricity from coal plants amid growing demand in the largest power-consuming state. TXU announced its $45 billion sale to a buyout group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group five days after opponents of the expansion plan persuaded state officials to delay by four months the approval process for seven of the company's proposed generators.
TXU still plans to build three generators at two plants that would be fueled by a type of coal called lignite, which is mined in Texas. The plants it's abandoning were to run on coal from Wyoming's Powder River Basin, which is cleaner-burning than lignite.
``We are certainly willing to talk to the new company coming in, but we are also prepared to fight,'' said Karen Hadden, executive director of the Sustainable Energy and Economic Development Coalition in Austin, Texas. ``We don't want dirty coal in the state of Texas.''
Hunger Strike
Hadden went on a 10-day hunger strike last year to attract attention to her fight against coal-fueled power in Texas. Smith said any new plants powered by coal should use pollution-cutting technologies such as gasification and carbon sequestration.
TXU said its decision to drop eight of the proposed units will prevent 56 million tons of carbon emissions annually. The company will devote $400 million to cutting power demand.
The compromise won praise from such environmental groups as the Natural Resources Defense Council. David G. Hawkins, director of the council's Climate Center, and Jim Marston, regional director for Environmental Defense, said the buyout firms involved in the TXU deal had negotiated with them on emissions-cutting concessions.
Reserving Judgment
Dallas Mayor Laura Miller previously accused TXU of ``purposely misleading the public in order to build old- technology coal plants the cheapest way possible to get the biggest return on their money.'' Miller, who said today she's pleased the expansion was scaled back, questioned why the buyers would support lignite-fueled units and why national environmental groups would effectively bless the plan.
``Environmental Defense doesn't speak for 36 cities, counties and school districts,'' Miller said, referring to a coalition she helped form to fight proposals for coal plants.
David Litman, co-chairman of Texas Business for Clean Air, said he was thrilled by TXU's announcement. He said he's waiting for more details on the company's plans for its existing and proposed plants.
It's significant that the cutbacks involve Texas instead of a state like California that is viewed as more of a leader on pollution issues, said Marston of Environmental Defense.
Need for Power
Governor Rick Perry had tried to speed up the approval process for TXU's new plants. Perry, in a statement today, applauded the TXU announcement, calling it an ``investment in emissions reductions, renewable sources and Texas jobs.''
Ted Royer, a spokesman for Perry, said about 10,000 megawatts of new generation capacity is still planned in Texas in the next several years, including the three TXU units. The new units, which will run on coal, wind and natural gas, will meet the state's need for additional power in the short term, he said.
The compromise was made to quiet critics and enable the deal to get approved quickly, said Gregory Phelps, who has TXU shares among the $5 billion in assets he oversees at MFC Global Investment Management in Boston.
``If in two or three or four years you start getting brownouts and blackouts on really hot days in Texas, whoever owns the plants that TXU owns now can say, `Well, we told you,''' he said.
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