TXU Fine Deal Struck Down By Court
December 28, 2007 by Vince Leibowitz · Leave a Comment
This is indeed interesting news:
State regulators and energy giant TXU this summer agreed to a plan that would have protected TXU from any more fines like the one for $171 million it now faces after being accused of manipulating the power market.
It would do so by implementing controls intended to protect consumers when demand for electricity spikes.
But in drafting the plan, the three public-utility commissioners ignored the recommendation of their own staff that a group of hundreds of Texas cities and an advocate for Texas ratepayers be allowed to participate. Reliant Energy, one of the state’s biggest electricity retailers, also asked — and was denied — a seat at the table.
AFL-CIO Supports KKR Buyout Of TXU
August 20, 2007 by Vince Leibowitz · Leave a Comment
Via Retuers:
NEW YORK, Aug 20 (Reuters) - The largest American labor federation, the AFL-CIO, said on Monday it supports the buyout of Texas power company TXU Corp. (TXU.N: Quote, Profile, Research) by an investor group led by private equity firms Texas Pacific Group (TPL.N: Quote, Profile, Research) and Kolhberg Kravis Roberts & Co. [KKR.UL]
In a letter to investors, the AFL-CIO said that the $69.25 per share offer for TXU is a 25 percent premium over the share price before the announcement. It added that shareholder returns will be greater if they vote for the deal rather than against it.
The union group pointed out that TXU shares are trading well below the offer price, implying that the market is factoring in that the buyout transaction may not be completed and that the stock could fall.
The AFL-CIO also said shareholder opposition to the offer seemed unlikely to improve the deal terms, given the recent turmoil in the debt and credit markets, which have made it difficult to raise money for leveraged buyouts,
Money manager Franklin Resources Inc. (BEN.N: Quote, Profile, Research), TXU’s largest shareholders, said on July 24 that it would vote against the $32 billion buyout bid for the Texas power company because the offer price is too low.
The text of the AFL-CIO letter is here.
PUC Says It Has No Authority to Hold TXU Accountable
August 17, 2007 by Vince Leibowitz · Leave a Comment
Add the ranks of the Public Utility Commission to those of state agencies that amount to little more than toothless tigers:
The Public Utility Commission on Thursday said it lacks authority to hold investors buying Dallas-based TXU to their stated promises to reduce electric bills and build fewer coal plants.
The commissioners chastised the investors for saying in published comments that oversight from state regulators was welcomed and then filing legal briefs opposing the review.
“Your PR campaign is different from your legal position,” said Chairman Paul Hudson.
I think anyone with a brain from TXU on down knew that the PUC couldn’t actually make TXU did what it said it was going to do. Furthermore, that TXU opposed itself shows that they knew the PUC had no authority.
KKR (Firm Involved In TXU Sale) To Go Public
July 4, 2007 by Vince Leibowitz · Leave a Comment
When I picked up a copy of the New York Times in the hotel lobby this morning and turned to the second section, this headline jumped out at me about the KKR Initial Public Offering. Here’s a tidbit via the NYT:
Less than two weeks after the Blackstone Group, its archrival, started trading as a public company, Kohlberg Kravis filed documents late yesterday to raise $1.25 billion.
Deals to take private equity and hedge funds public are now happening at a frenzied pace, suggesting that these funds might see a limited window in which to gain access to the public markets.
The outlook for private equity firms has worsened over the last month, with leading members of the Congressional tax-writing committees introducing legislation to raise taxes significantly on private equity managers. The Congressional broadside attack was accompanied by a marked deterioration in the debt markets, with the cancellation or repricing of several prominent bond sales, reflecting investors’ concern about the risk inherent in those instruments. The boom in buyouts has been largely fueled by the availability of cheap credit.
And yet hardly a day has passed without another hedge fund or private equity firm announcing that it would go public. The Fortress Investment Group blazed the path in February, followed by Blackstone. Last week, GLG Partners, one of London’s leading hedge funds, announced that it would go public through a complex reverse merger. On Monday, the Och-Ziff Capital Management Group, a $27 billion hedge fund, announced that it would sell units to the public.
Founded in 1976 by three Bear Stearns alumni, including the cousins Henry R. Kravis and George Roberts, Kohlberg Kravis is credited with creating the leveraged buyout, where public companies, often seen as undervalued by investors, are bought with cash and a large amount of borrowed money. Private equity firms then make changes to the companies — like replacing management or selling divisions — before selling them or taking them public again, reaping profits along the way.
Kohlberg Kravis’s most famous buyout, the takeover of RJR Nabisco, was chronicled in the book and movie “Barbarians at the Gate.â€
…
Kohlberg Kravis has long been one of the most aggressive private equity firms, and this year has been no exception. The firm announced 11 deals in 2007 with a combined value of $121.1 billion, more than any of its rivals, according to data from Dealogic. It is one of three firms that have agreed to pay $45 billion for TXU, the Texas energy giant, in what is the largest leveraged buyout in the United States.
And, what of that deal? Obviously, a publicly traded private equity firm will have to answer to a lot more people (ie, stockholders, Wall Street) than a private one. Could the TXU deal now be too much of a risk for KKR? When the company goes public could its stock price decline every time TXU is dealt a setback in a Texas court or by a state regulatory agency?
Who knows? Not being a financial analyst, I can’t tell you what effect the KKR IPO will have on TXU. However, I suspect it will be something.
I also found it interesting that former U. S. Commerce Secretary Don Evans (a name mentioned for Texas Governor in 2010, by the way), had a nice puff-and-fluff guest Op Ed/bitch fest in the Dallas Morning News in response to an investigative report by the paper claiming how much TXU invited more government regulation:
 As a lifelong Texan and true believer in the importance of innovation and investment in our state’s strong and growing economy, I agreed to lead the TXU Corp. board of directors under the new ownership of the investors to help guide this transformation.
We understand that TXU plays an important role in the lives of many people, here in North Texas and across the state. And because of that, we have spent a great deal of time listening to the people we hope to serve.
We all agree: Corporate citizenship is not a gimmick, it’s a given. We practice Texas values because we value Texas. We live and work here, too. We want our policies to not only save dollars for our customers but also make sense for our communities. After all, being a good neighbor is good business.
Under our stewardship, the new TXU will not only talk the talk, we’ll walk the walk. We have asked the state regulatory agency, the Public Utility Commission of Texas, to hold us accountable for our commitments. The PUC has always had, and will continue to have, the power to regulate electric delivery rates in Texas, whether the commission is dealing with the old TXU or a new TXU.
That should make you laugh, because according to the Washington Post, KKR is in such a rush to do its IPO because it wants less government regulation and tax liability:
In the days leading up to the IPO, lawmakers proposed a slew of tax bills aimed at Blackstone and other big private-equity firms. These companies organize themselves as partnerships and pay taxes at the capital gains rate of 15 percent.
Bipartisan legislation proposed in Senate last month would force private-equity firms that sell shares to the public to pay at the 35 percent corporate tax rate.
Interesting. On one hand they are “inviting regulation” and on the other hand they’re trying to get out of paying more taxes. How amusing is that?
Energy Costs Make Texas Unattractive To Business
April 30, 2007 by Vince Leibowitz · Leave a Comment
Even though our tax structure is more friendly to them, our laws favor them over consumers and employees, and our campaign finance laws enable them to buy influence relatively easily, businesses are finding Texas an unattractive location these days.
Why? Skyrocketing electric rates.
Yep. Behemoth price gougers like TXU and other utilities are making Texas a bad place for business.
VIDEO: Power Wars
April 11, 2007 by Vince Leibowitz · Leave a Comment
The above is a very interesting little video likening TXU to Enron and making some very important points about TXU’s threats to the Legislature and market manipulation. Worth a watch, indeed.
While we’re on the subject, we’re also hearing some rumblings about Houston energy giant Reliant…word on the street seems to be they may be having another “correction” later this year (a la 2002), and possibly something about an accounting dust-up. We’ll keep you posted.
TXU Could Be Fined Up To $210 Million For Electric Market Abuses
March 29, 2007 by Vince Leibowitz · Leave a Comment
Utility giant TXU would be forced to pay as much as $210 million in fines for abuse of the Texas electricity market if recommendations by the Public Utility Commission released yesterday become reality.
The proposed penalties follow the Commission’s regulation that TXU engaged in unfair practices in the wholesale electricity market and amassed $20 million in profit as a result.
More from the Star-Telegram:
Dewhurst’s TXU Connections Under The Microscope
March 23, 2007 by Vince Leibowitz · Leave a Comment
It seems as though David Dewhurst’s honeymoon is finally over. He’s gone through four years as Lite Governor relatively unscathed by major controversy—except those he’s stirred up through the legislative process.
Now, however, as the media realizes he may be stepping up to the plate in 2010 to run for Governor or possibly challenge John Cornyn for a U.S. Senate Seate, it’s time to take the sandpaper to that unscratched finish.
And, wouldn’t you know it, it’s not just a little something. As if the fact that Dewhurst’s staff was well aware of problems with the Texas Youth Commission two years ago wasn’t enough, it now seems he has some pretty cozy connections to a couple of folks involved with another controversial acronym this session—TXU:
Possible TXU Buyers Don’t Want More Regulation
March 21, 2007 by Vince Leibowitz · Leave a Comment
While many of us breathed a sigh of relief when it was revealed that the possible KKR buyout of TXU would also put an end to many of the company’s proposed coal plants, it’s time to start wondering again.
As always, when big business doesn’t want government taking a close look at a transaction, that means the government should pick it apart with a fine-tooth comb.
Luckily, the members of the Committee yesterday didn’t seem to swallow much of the argument:
“I think the issue is too important simply to defer without allowing the PUC to take a look at it. Put me down as a skeptic,” said Sylvester Turner, D-Houston.
Report Indicates TXU Engaged In “Market Power Abuse,” Barton Wants Federal, State Scrutiny Of Any Sale
March 12, 2007 by Vince Leibowitz · Leave a Comment
The hits just keep on coming for utility giant TXU. And, we don’t mean that in a good way.
Less than a week after TXU started running a touchy-feely spot telling Texans, “Welcome to the new TXU!” that included a statement on droppint electricity rates, a Public Utility Commission of Texas memorandum accuses the utility giant of “Market Power Abuse.”
Could that be why the commercial below includes the phrase:
“We’ve listened to Texans on Prices, and we’re taking a new approach! To prove it, most residential customers will get a double-digit price cut!”
At any rate, the memo (via QR), notes:
