KKR, TPG sweeten TXU deal(2)

As Texas legislators consider giving the state’s Public Utility Commission power to block the proposed $45 billion buyout of TXU, KKR and TPG have promised to terminate an existing labour subcontracting agreement at the utility company, which has in turn put the electrical workers union in their corner.

In a further attempt to sweeten its controversial $45 billion (€34 billion) bid for Dallas, Texas-based utility company TXU, Kohlberg Kravis Roberts and Texas Pacific Group will halt an existing labour subcontracting agreement that was opposed by The International Brotherhood of Electrical Workers union and had been under review by the state’s Public Utility Commission.

Initially announced in June 2006, the subcontracting agreement was a 10-year, $8.7 billion deal for utility-related construction and maintenance services to be provided by InfrastruX Group for TXU Electric Delivery, TXU ’s regulated electric distribution and transmission business.

“Although we plan to terminate this joint venture, InfrastruX will continue providing utility support services to TXU Electric Delivery, allowing them to utilise their expertise and knowledge of our system,” said Tom Baker, chairman and chief executive officer of TXU Electric Delivery, in a statement.

The move comes as the Texas House of Representatives debates Thursday whether to pass a bill giving the state’s Public Utility Commission the power to review and block the TXU buyout. The state’s Senate has already passed a similar bill.

These legislative actions are now being opposed by the electrical workers union in return for TXU’s termination of its subcontracting deal with InfrastruX, Reuters reported.

At a March meeting before the House Committee on Regulated Industries, KKR co-founder Henry Kravis and TPG co-founder David Bonderman said giving the Public Utility Commission the authority to block their bid for the US’ sixth largest utility could potentially threaten the deal.