The New, Green Face of Wall Street

By Tara Lohan, AlterNet. Posted March 3, 2007.

Big corporate takeovers happen all the time. Mergers and acquisitions are so run-of-the-mill it is hard to keep track of who owns what anymore. But this week was different. This week the largest buyout was set in motion -- Kohlberg Kravis Roberts & Co. and Texas Pacific Group is hoping to buy the Texas utility giant TXU for $45 billion. And the best part of the whole deal is not its size but the conditions of sale.

In a matter of a few days one of the country's dirtiest utility companies went from an environmental foe to model for "green" business and the repercussions for not just Wall Street, but the rest of America, are huge.

TXU had been battling environmental and community groups since last spring when it announced plans to build 11 new pulverized coal-fired power plants across Texas -- essentially committing the state to 50 more years of the dirtiest of dirty power -- with an estimated 78 million tons of CO2 emission expected per year.

With money and political clout, the project seemed like a done deal, but that didn't stop Environmental Defense, the Natural Resources Defense Council (NRDC), Public Citizen, Rainforest Action Network (RAN) and dozens of other groups from unleashing their organizing wrath.

The coal plants were fast-tracked in their permitting process by Texas Gov. Rick Perry, long known to be a friend of the utility companies. But then, little by little, environmental groups and their allies began to wear at TXU -- targeting potential investors, mounting ad campaigns and throwing up litigation roadblocks.

TXU appeared to stumble last week when a judge announced that Perry had overstepped his bounds in the fast-tracking and delayed the permit hearings four months, giving TXU opponents time to gather money and muscle.

And then just days later news broke that a deal was being negotiated for TXU to be purchased by two private equity firms -- and helping to make that deal a reality were representatives from Environmental Defense and NRDC -- marking the first known time that environmental groups have been brought to the table.

"What I can tell you is, a little over a week ago I got a call from Bill Riley, an old friend," Fred Krupp, president of Environmental Defense said in an interview, "who said that the Texas Pacific Group and KKR were interested in purchasing TXU, but would only go forward if they could recreate the company as a 'green' power generator."

Less is more

The board of TXU agreed Monday to the terms of the buyout (although they are considering other offers) and environmental groups have hailed the deal as a "watershed moment" in the fight against climate change -- for good reason.

TXU agreed to immediately drop eight of the 11 proposed coal-burning plants; it canceled plans to build coal plants in other states; it came out publicly in support of federal legislation to set limits on CO2 emissions; it agreed to reduce their CO2 emissions back to 1990 levels by 2020 (the terms of the Kyoto Treaty that the U.S. did not sign); and it pledged to double the amount that it spends on wind power and energy efficiency -- agreeing to shell out $400 million to help lower demand through conservation.

"It is a big deal," said Jim Marston, of Environmental Defense, who helped negotiate the deal. "We have the largest CO2 emitter in Texas now on record saying 'we're for federal legislation.' And, not only have they canceled plans for eight plants in Texas, but many more they were planning in Pennsylvania, Georgia and Virginia."

And, Martston adds, "They are promising a new ethic" to reward executives for how well the company does environmentally. "That's a big deal for us," he said.

Michael Brune, the president of RAN called the move the "beginning of the end of Big Coal's dominance over America's energy future" -- a hopeful statement.

"Twenty months ago, many of the nation's political and business leaders were marching behind the Bush energy plan, a lockstep that resulted in proposals to build more than 150 new coal-fired power plants," he said. "Investment banks on Wall Street facilitated these proposals by committing billions of dollars for dirty coal plants that would burden the country with outdated technologies and unprecedented growth in greenhouse gas emissions for generations to come. The pledge by TXU's new owners reflects an emerging economic and political reality: any further investment in dirty, inefficient coal plants is risky business."

Investing in the future

For once, it is not business as usual for Wall Street. The deal indicates a new breakthrough in the fight against global warming, because it signifies a shift in investor thinking about the realities of carbon "footprints" -- or the impact corporations make on the environment with CO2 and other greenhouse gas (GHG) emissions.

"I think they chose to pare back the original TXU plan not because it was environmentally flawed but because it was financially flawed due to environmental reasons," said David Gardiner of David Gardiner & Associates, a consulting firm that helps companies make decisions about environmental and sustainability issues.

See more stories tagged with: texas, global warming, climate change, txu, coal plants

Tara Lohan is a managing editor at AlterNet.

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