Wall Street adds climate change to bottom line
The environmentally tinged takeover of TXU Corp. illustrates global warming's increased financial relevance.
from the February 27, 2007 edition
Page 3 of 3
At the same time, the Ceres report called into question some of the revenue and cost assumptions that TXU had made to justify the new plants.
"We think they had overestimated the amount of growth and underestimated the amount of the coming carbon controls and the cost of complying with the existing Clean Air Act," says David Gardiner, one of the authors of the report and a sustainability consultant in Arlington, Va.
TXU buyers moved to ease opposition
Some of these issues resonated with the group of TXU buyers, which includes the Texas Pacific Group, Goldman Sachs, and Kohlberg Kravis Roberts & Co. Texas Pacific and KKR are private equity groups that amass money from pension funds and wealthy individuals and buy companies.
Monday, in Dallas, the buyers' group said they would drop eight of the 11 new coal-fired power plants if their deal succeeds. They also said they would roll back electricity rates by 10 percent. And, they indicated they would work towards meeting any national emissions caps in the future.
"It's a sign people are paying attention," says Rodney Taylor, managing director of the environmental-services group at Aon, a large Chicago-based insurance broker. "From a financial standpoint, it also says something about the perception of where energy costs are going. KKR is kind of a medium-term investor, so they must be looking at energy costs going up sharply over the next three to five years."
• Wire reports were used in this report.
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