The biggest ever proposed buyout in history has had an accompanying public relations push of unprecedented effectiveness. Groups outside the circle of buyer, seller and intermediary have been issuing feel-good press releases and organising press conferences – and it’s not just spin, they say.
Key environmental groups, along with a star ensemble of politicians and public officials, have lined up to endorse the $45 billion (€34.3 billion) bid for Dallas, Texas-based energy company TXU.
Press releases from Environmental Defense, the National Environmental Trust, and The Natural Resources Defense Council praised the proposed buyers – private equity firms Kohlberg Kravis Roberts and Texas Pacific Group, along with investment bank Goldman Sachs – for the sustainable energy strategy they would bring to TXU.
Not only do the buyout firms say they will squelch plans for eight of the 11 new coal-fired power plants in TXU’s pipeline, they will also reduce the company’s carbon emissions to 1990 levels by 2020 and endorse a federal carbon cap.
The environmental groups – which had previously criticised TXU’s environmental policies, and have worked closely with KKR and TPG to compose a deal pleasing to all constituents – also point out that KKR and TPG will double the company’s purchase of wind power and efficiency expenditures, explore new coal generating technologies, devote $400 million to demand-side management initiatives, tie executive compensation to climate protection goals, and create a sustainable energy advisory board.
A press teleconference regarding the buyout and TXU’s proposed policy turnaround was hosted Monday by the aforementioned environmental groups and interested stakeholders such as watchdog organization Public Citizen. When asked by a reporter whether the environment-related terms of the deal weren’t simply window dressing to push the deal through, the environmentalists on the call vehemently denied such suggestions.
“These things are genuine and substantial changes, and we wouldn’t have been interested in supporting the buyout if it were just a PR stunt,” said Dave Hawkins, director of the Natural Resource Defense Council’s Climate Center. His organisation has been negotiating with the potential buyers for weeks, he said, and wouldn’t have bothered doing so if the private equity firms weren’t serious about turning around TXU’s policies. “We have better things to do with our time,” Hawkins said.
In addition to the backing of major environmental groups, KKR and TPG have lined up environmental and political heavies to advise or participate on TXU’s board of directors. James Baker, former US secretary of state, will serve as an advisory chairman; William Reilly, chairman emeritus of the World Wildlife Fund and former EPA administrator, will join TXU’s board; and Lyndon Olson Jr., former Texas state representative and former US ambassador to Sweden, will also join its board.
Such endorsements and high-level involvement may be the result of lessons learned by both KKR and TPG, each of which previously had acquisitions of utility companies blocked by state regulators. In 2004 Arizona blocked a $3 billion, KKR-led bid for UniSource Energy Company. In 2005, TPG’s $1.2 billion bid for Oregon-based Portland General Electric was rejected by regulators concerned over possible rate increases, large debt burdens and short-term ownership plans.
Both private equity firms have fared better in Texas, thus far. The two firms were part of a consortium of investors, including The Blackstone Group and Hellman & Friedman, which in 2004 bought Texas Genco for $3.7 billion and subsequently sold it in 2006 for $5.8 billion.