TXU: Record Buyout Hinges on Clean Energy

The beginning of the end for old-school coal investment?

When private investors looked at Dallas-based energy company TXU, they saw a classic old-school energy outfit -- and an opportunity to drive profit through a shift to clean energy. Their record-setting 2007 buyout proposal hinged on a major turnaround in TXU’s business strategy.

The company had planned to build 11 new coal-fired power plants in Texas. But the private equity groups, after consulting with NRDC and others, insisted that the company prepare itself for the virtual inevitability of carbon emissions caps, and focus on energy efficiency and cleaner energy generation instead. TXU now plans to construct no more than three new plants, at least two of which will feature state-of-the-art technology to capture carbon dioxide emissions, the primary cause of global warming.

The plan is a forward-looking strategy intended to maximize profitability even after new and more stringent emissions regulations are in place. TXU now has a front-runner advantage over its competitors by getting ahead of the regulatory curve. And in the short term, the company expects more public support for its new, cleaner power plants, and thus a quicker permitting process that will allow it to bring the plants online faster, bolstering the bottom line.

In addition, by developing consumer-oriented programs to drive energy savings -- including rebate programs for efficient air conditioners, compact fluorescent lightbulb programs and more -- the company will help its customers hold their own costs down.