TXU Bought out.

[Cant_Be_Faded]

http://business.scotsman.com/index.cfm?id=307182007

TXU taken over in $45bn private equity deal
NICK BEVENS

TXU Corp, the Dallas-based energy company, has been bought by a pair of private equity firms, Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG), for $45 billion, making it the biggest takeover by private equity in history.

GS Capital Partners, Lehman Brothers, Citigroup and Morgan Stanley said they intend to be equity investors.

Under the terms of the merger agreement, shareholders will be offered $69.25 per share, which represents a 25 per cent premium to the average closing share price over the 20 days to last Friday.

TXU said that, as a result of this transaction, the newly privatised company will deliver price cuts and price protection benefits to electricity customers, strengthen environmental policies, make significant investments in alternative energy and institute corporate policies tied to climate stewardship. It is the third time in four months that the record has been broken, most recently with Blackstone's $38.9bn offer for Equity Office Properties. It also comes as a private equity group that includes TPG has said that it is considering an £11bn bid for Sainsbury, Britain's third-largest retailer, in what would be the biggest deal of its kind in Europe.

Part of the plans ahead will be a scaling back of TXU's $10bn plan to build 11 new coal-fired power stations - it will now only build three.

TXU has prospered in recent years, because most of its energy is generated using coal and nuclear power, but Texas electricity prices are tied to the price of natural gas.

But the company and its chief executive, John Wilder, have been embroiled in a battle with environmentalists over the use of coal-fired stations since the utility announced the $10bn building programme last year.

Under Wilder, the company had claimed it was imperative the plants were built to meet the future demand for electricity. Critics, however, argued that increased carbon-dioxide emissions represented too high a price.

TPG and KKR are believed to have only agreed to go ahead with the three of TXU's coal plants because they were already under construction. The pair have pledged to cut emissions of pollutants, such as nitrogen oxides and sulphur dioxide, by 20 per cent on the three plants.













The Evil Empire--bought out? What can come of this now? open thread-----.wnt'

[ChumpDumper]

Part of the plans ahead will be a scaling back of TXU's $10bn plan to build 11 new coal-fired power stations - it will now only build three.:tu

[boutons_]

You just can't cut 8 power plants if they were seriously needed and planned. Sounds like setup, a scam, to me, some kind of PR fluff to fool people into thinking something "green" happened here.

Here's an article giving some background to this deal, and how utility deregulation often fucks customers badly as their local utility monopoly or cartel plays money games to suck the customers dry. As with deregulation of airlines, deregulation of the utilities has generally fucked the customer.

Taking TXU private of course increases accounting opacity and kicks shareholders out of the picture, allowing TXU to pay it private shareholders and top mgmt obscene compensation, whille fleecing the sheeple.

=========================


October 23, 2006


In Deregulation, Power Plants Turn Into Blue Chips

By DAVID CAY JOHNSTON

Four big investment firms bought a group of Texas power plants in 2004 for $900 million and sold them the next year for $5.8 billion.

Sempra Energy, parent of the utility in San Diego, bought nine Texas power plants with two partners in 2004 for $430 million, selling two of them less than two years later for more than $1.6 billion.

Goldman Sachs and its partners bought power plants in upstate New York, Pennsylvania and Ohio starting in 1998 and sold them in 2001 at a profit of more than $1 billion.

( so the the original purchases were WAY under market value, or what? )

These extraordinary profits have come during a decade-long effort in about half the states to overhaul the business of producing electricity * in the name of stimulating competition and lowering utility bills.

( http://spurstalk.com/forums/images/smilies/smilol.gif http://spurstalk.com/forums/images/smilies/smilol.gif http://spurstalk.com/forums/images/smilies/smilol.gif The states can't hold a candle to financial prowess of the big financial outfits. Sheeple, bend over and grab your ankles.)

But even as some investors have profited handsomely by buying and sometimes quickly reselling power plants, electricity customers, who were supposed to be the biggest beneficiaries of the new system, have not fared so well. Not only have their electricity rates not fallen, in many cases they are rising even faster than the prices of the fuels used to make the electricity. Those increases stand in contrast to the significantly lower prices in other businesses in which competition was introduced, such as airlines and long-distance calling.

Some electricity customers are also being saddled with monthly surcharges to cover construction costs for plants that were sold at bargain prices and then resold at huge profits. Some of these surcharges will continue for years.

Analysts cite several reasons that the new system has not been as successful as hoped.

Regulators required some utilities to sell their power plants so that independent electricity producers could compete on equal footing with those plants. But not enough new competitors emerged.

And sometimes regulators allowed utility holding companies to transfer plants from their regulated utilities to unregulated wholly owned subsidiaries. When some of these unregulated sister companies still found it hard to turn a profit, regulators allowed the plants to become regulated companies again, so they were virtually guaranteed state-approved profit rates.

By last year, only 63 percent of the nation's electricity generating capacity was owned by utilities, down from almost 90 percent 10 years ago. Often customers did not come out ahead, critics of the new system say.

Take the case of the Texas power plants. After the Texas Legislature, urged by Enron and big industrial customers, voted to make electricity generation a competitive business, the utility serving the Houston area sold 60 power plants that generate most of the power for the area to four investment firms * the Texas Pacific Group, the Blackstone Group, Kohlberg Kravis Roberts and Hellman & Friedman * which soon resold the plants at the $5 billion profit.

But state regulators have ordered electricity customers to pay an average of $4.75 monthly for 14 years to finish paying for the construction of the power plants, plus interest.

And the utility that sold the plants, Centerpoint, is suing for even higher payments from customers. Houston-area consumers now pay among the highest electricity rates, nearly double the national average.

Supporters of deregulation said customers would benefit from healthy competition among a growing number of electricity producers. But such competition has not developed. For one thing, many of the new power plants failed because, unlike many of the old plants, they almost all used natural gas to produce electricity. Demand for natural gas soared, and the price for that fuel tripled, making electricity from these plants too costly to be competitive.

The value of these plants collapsed, and some owners sought refuge in bankruptcy court. That is when investment firms, anticipating a much higher price for the plants' electricity, bought them for as little as 20 cents for each dollar spent to build them.

And in fact the investment firms calculated doubly right: By paying so little for the plants, they made the construction costs of new plants by competitors seem prohibitively expensive. Over the last five years, few new power plants have been built, although demand for electricity has risen.

The story has been different for electricity customers. Many of the power plants that were sold are still owned by the utilities' parent companies; they were simply transferred from the regulated utilities to unregulated sister companies. Some regulators allowed utilities to favor the sister companies with long-term contracts even if they did not offer the best price for electricity.

In fact, independent electricity producers argue that their modern generating plants often sit idle while older, inefficient plants owned by politically powerful utilities and their unregulated sister companies whir around the clock under long-term contracts. For example, Calpine, an independent generating company, and some big industrial customers have complained that Entergy, the Louisiana utility holding company, is favoring its own plants when Calpine's power would be cheaper. Congress has ordered studies of the issue.

Because utilities are still allowed to pass on the cost of the power they buy, they have little incentive to choose a cheaper supplier. Electricity customers therefore end up paying more than they would have to if electricity production were truly competitive.

After Baltimore Gas & Electric transferred its 12 power plants to an unregulated affiliate and became only a distribution company, it continued to buy 70 percent of its electricity from the plants because there were not enough independent generators to supply the area's needs. Baltimore Gas & Electric sought a 72 percent rate increase this year, causing such an outcry that Maryland regulators gave it only an immediate 15 percent, but with big additional increases virtually guaranteed over the next few years.

Paul Allen, a spokesman for the utility's parent company, Constellation Energy, said that Baltimore Gas & Electric rates had been frozen since 1993 and that the increase largely reflected the higher price of producing electricity, including the cost of fuel. He said a rate increase was inevitable regardless of the new system.

But Robert McCullough, a utility economist and consultant, disagreed and blamed the new system. He said that in places like Baltimore, where a utility's plants were sold to an unregulated sister company, "the same energy is generated by the same plants, owned by the same owners, and sold to the same customers, simply at a vastly higher price."

Ralph Nader, head of the watchdog group Public Citizen, said that many power plants were sold for artificially low prices and that state regulators often failed to protect customers. He said regulators should have required price protection to shield consumers from a "double header corporate gouge, where the defenseless customer is paying twice for the same power plants."

The American Electric Power Company, which owns utilities in 11 states, sold nine of its Texas power plants to SEMPRA, the parent of a San Diego utility company, and the Carlyle Group in 2004 for $430 million. SEMPRA and Carlyle quickly resold two of the plants for $1.6 billion.

American Electric wanted customers to pay an average of $9 a month for 14 years to cover the difference between the cost of building the plants and the lower price for which it sold them, plus interest. But because the resold plants went for 15 times as much per unit of generating capacity, state regulators questioned whether the utility should have sold the plants for higher prices. Still, regulators have required customers to pay on average $5 per month for 14 years, or more than $800 each.

There are persistent allegations that many plants have become inordinately profitable for their new owners; in some cases, disputes have arisen over just how profitable the plants are. In Connecticut, three plants together earn at least $700 million in annual profits, money that is over and above the 10 percent profit they would earn if they were still in the regulated system, Attorney General Richard Blumenthal said. He wants the state to end the new system and return to a more regulated system or even have a state agency provide power.

The plant owners, P.S.E.& G. and Dominion, said that the profit estimates were "wildly exaggerated" and that most of the power was sold at fixed prices with profits not significantly different from what regulated plants would earn. They did not release precise profit figures.

In Ohio, the state's consumer advocate, Janine Migden-Ostrander, said the potential savings from a competitive electricity industry were undercut by favoritism that regulators showed to utility companies.

In effect, she said, Ohio regulators allowed an extremely favorable price when unregulated sister companies acquired power plants. The lower the price a sister company pays for a power plant, the more difficult it is for an independent power producer that must build an expensive new plant to compete. That "is how the utilities killed the market before it could be started," she said.

Lynn Hargis, a longtime utility regulation lawyer who now volunteers as counsel to Public Citizen, said the terms under which power plants were sold are "the equivalent of selling your grandmother's house for the price she paid 60 years ago, less depreciation. No one would do that."

The utilities say that no one knew at the time the plants were sold that they would later soar in value. ( http://spurstalk.com/forums/images/smilies/smilol.gif Nobody but the buyers! http://spurstalk.com/forums/images/smilies/smilol.gif ) Floyd Le Blanc, a spokesman for Centerpoint, the Texas company that sold the 60 Houston-area plants, said, "We complied with all legal and regulatory requirements." His remarks were echoed by other utilities.

But even after buying plants at low prices, some utilities have been unable to profit in a competitive setting after decades of operating in a regulated market, where profits are virtually guaranteed. State governments have provided a refuge.

Corporate parents with both regulated utilities and unregulated power plant companies have persuaded sometimes reluctant regulators to allow them to put failing plants into the hands of the regulated utilities, where they were almost certain to turn a profit, said Richard Stavros, executive editor of Public Utilities Fortnightly, a trade magazine. That has happened in Arizona, Missouri, Texas and other states.

Arizona Public Service, for example, brought five plants owned by its unregulated affiliate, Pinnacle Energy West, into the utility. The staff of the state board that regulates utilities at first opposed the deal, saying it was not in the best economic interests of customers. But the staff relented after Arizona Public Service promised it would not add any power plants to its regulated operations before 2015, which may encourage others to enter the market.

The Federal Energy Regulatory Commission (the same Repug-compromised FERC that refused to get involved when Enron was fucking Dem California in 2001) recently approved a deal to move a Texas power plant back into a regulated utility, although it expressed concern that allowing utilities' parent companies to salvage their failed investments in the competitive market could be unfair to competing generating companies.

( FERC "expressed concern" GMAFB How about fucking regulating something to protect consumers? )

The sale back to utilities of power plants that are not making money is "a disturbing national trend," said Jan Smutny-Jones, executive director of Independent Energy Producers in Sacramento, Calif., a trade association for power plant owners.

"It's a great deal," he said, "having ratepayers cover your managerial mistakes."

[Yonivore]

You just can't cut 8 power plants if they were seriously needed and planned. Sounds like setup, a scam, to me, some kind of PR fluff to fool people into thinking something "green" happened here.
Personally, I hope they propose building nuclear power plants.


Taking TXU private of course increases accounting opacity and kicks shareholders out of the picture, allowing TXU to pay it private shareholders and top mgmt obscene compensation, whille fleecing the sheeple.
I'm a TXU customer and, while I don't know what changes this will bring, thanks to deregulation, I can use another provider if TXU starts trying to "fleece the sheeple."

But, on the point "top mgmt obscene compensation." I can't pass up the opportunity to say something.

Funny, how when the left starts harping on something, someone will actually put pen to paper and actually start looking at the facts.

It appears the CEO Big Dogs are not experiencing the same boom under Bush as they were used to during the Clinton years.

The ratio of CEO pay to worker pay has actually dipped during the Bush years!

The information was published this week in:

"A Better Look At The Boss's Pay (http://www.businessweek.com/magazine/content/07_09/b4023044.htm)," Business Week Online.

http://images.businessweek.com/mz/07/09/0709_44newins.gif

You wouldn't know this information if you were to depend on the democratic party. This is what democrats said (http://www.democrats.org/a/2006/07/must_read_irs_t.php) in July of 2006:


This announcement (IRS auditor layoff) comes on the heels of recent economic reports of a growing disparity in income between the nation's wealthiest Americans and everyone else. The gap has grown in part because CEO compensation has exploded while median family income has decreased. This reduction in IRS oversight of America’s wealhiest is just the latest example of Bush Administration and Republican policies that consistently put the priorities of the GOP and its special interest cronies ahead of the needs of the American people.
I think it's becoming more and more clear that Democrats just say shit to see if it sticks and, if no one bothers to check their facts, they get away with it.

Oh, and boutons, way to stay away from the Bushco hot-keys. Back on the meds?

[sabar]

Nuke plants would be nice but people won't allow it until we are on the brink of having no other alternative. I'd guess their either scheming to get some cash or just going to go with natural gas plants, which is cleaner than coal but somewhat more expensive.

[101A]

As with deregulation of airlines, deregulation ... has generally fucked the customer.

Yeah, more flight choices at half the cost really sucks. Also, I wish Fed-Ex, and all the other overnight carriers still didn't exist. I wish the government would regulate the airline industry JUST like it has the railroads, which continue to be a viable, affordable and usable form of public transportation and shipping.

[boutons_]

"more flight choices at half the cost really sucks."

The concentration of hub-and-spoke system means less flights, fewer airports served, less flight choice, more stops, nearly every flight sold out. All the major airlines are or have been bankrupt or nearly so. Flying now is pretty much same experience as cows in cattle cars.

=============

an article on recent airline performance:

Flying Late, Arriving Light
Air Carriers Are Delaying More Flights and Losing Your Shirts

By Del Quentin Wilber
Washington Post Staff Writer
Thursday, February 8, 2007; D01

Air travelers had a tough year getting to their destinations on time -- and with bags in hand.

Airlines' on-time performance dropped for the fifth year in a row in 2006, with one in four flights arriving late or not at all, according to data released yesterday by the Bureau of Transportation Statistics.

It was the worst year since 2000, when bad weather and high demand kept 27 percent of flights from getting to their destinations on time.

The airlines also mishandled a massive amount of luggage -- 4 million bags, or 6.7 for every 1,000 passengers, the industry's worst rate since 1990. Most industry analysts agree that the spike in lost bags stemmed from stricter security measures that prompted passengers to check more of their luggage.

There was less consensus on the increase in delays. "We had a very bad weather year last year, and that's one of the reasons 2006 hit a record number of delays," Marion C. Blakey, head of the Federal Aviation Administration, said at a news conference last week.

Statistics seem to undercut the weather argument, according to consultants and academics who examine airline performance. The percentage of flight delays caused by weather has actually been dropping, to 45 percent last year, despite blizzards that snarled air traffic during the holiday travel season.

In 2004, half of all delays were caused by weather, according to the Bureau of Transportation Statistics, which is part of the Transportation Department.

The increase in delays most likely resulted from airlines cutting the time aircraft are allowed on the ground before their next departure, said Ahmed Abdelghany, an assistant professor of airline management at Embry-Riddle Aeronautical University in Florida.

Carriers have also aggressively scheduled flights at peak times, causing congestion at airports, Abdelghany said. Worker cutbacks have contributed, too, he and other experts said.

Dean Headley, co-author of the annual Airline Quality Rating report, said the delays signal that the airlines are recovering from their historic downturn.

As passenger traffic has steadily risen, airlines have been disciplined about not adding flights. The airlines also have cut their fleets, reducing the number of spare aircraft available in a pinch. Instead of canceling flights, airlines have turned to prolonging delays, Headley said.

"There is not much room for margin of error in the system now," said Headley, an associate professor of marketing at Wichita State University.

Outside experts, airline trade groups and FAA officials also blame the nation's antiquated air traffic control system for causing snarls. FAA officials are working on a billion-dollar plan to revamp it.

"We are hitting the wall in terms of the system we have today being able to handle the volume," Blakey said last week.

Among the best performers last year: Hawaiian and JetBlue airlines mishandled the fewest bags per 1,000 passengers. Atlantic Southeast Airlines, a regional carrier for Delta Air Lines, mishandled the most.

The best on-time performers were Hawaiian, Frontier and Southwest airlines, which were on time at least 80 percent of the time. The worst: Atlantic Southeast Airlines, whose flights were late 66 percent of the time.

Kate Modolo, a spokeswoman for Atlantic Southeast, said the carrier has been working to improve its baggage handling and on-time performance. Of the 20 carriers measured by the Transportation Department, Atlantic Southeast improved from the worst in on-time performance in November to the 10th-best in December. "We are on a trend of continuous improvement," she said.

===============

As with any corp, esp monopolies and cartels, the overriding objective is to deliver the shittiest product for the highest price.

[boutons_]

"Bush as they were used to during the Clinton years."

Assuming a President has any real influence on the economy, Clinton managed the economy for the biggest, longest peace-time expansion. dubya's economy clearly sucks in comparison.

"The ratio of CEO pay to worker pay has actually dipped during the Bush years!"

The chart coincides exactly with the busting of the dot-com bubble.

Rather than execs getting less compensation, the corps have been getting more clever in hiding compensation to their execs, and are battling constantly to do so. The corps want more opacity, not transparency in their accounting. And who's driving the corps in this directoin? The top execs, to line their own pockets without knowledge of shareholders, or, taking the corp private to exclude sharedholders completely.

[Cant_Be_Faded]

Yeah something has to be up, we're either going to get mass brown outs soon, ass raped by prices, or they'll propose switching to something like methane or god knows what...but where will we get it from?

It seems too fishy to me.

[Nbadan]

Thanks to tight regulatory control and public-owned utility companies like CPS in San Antonio, Texas currently produces more electricity than it needs, that's why companies like Microsoft want to build a multi-million dollar server network in Westover Hills. Cheap, abundant electricity.

[boutons_]

IT datacenter power costs:

http://www.pcworld.com/article/129369-1/article.html?tk=nl_dnxnws

[boutons_]

There's nothing wrong with building coal power plants, if the power companies would build the more expensive clean plants (but still much less expensive than nuclear).

Another solution is "carbon sequestration" where CO2 exhaust is captured and pumped into the earth.

But the power companies want to keep building dirty coal-fired plants, and refuse add scrubbers to their dirty existing plants.

Because the power industry won't support clean coal-burning plants, nuclear is beginning to be accepted, even by environmentalists, even by Stewart Brand, as the lesser of two necessary evils.

1000 coal-fired plants are planned around the world.

[1369]

Thanks to tight regulatory control and public-owned utility companies like CPS in San Antonio, Texas currently produces more electricity than it needs, that's why companies like Microsoft want to build a multi-million dollar server network in Westover Hills. Cheap, abundant electricity.

I'm looking, but I could swear I read that projections have ERCOT needing to import power in the near future.