TXU Corp. Acquisition Complete
TXU Corp. completed its merger agreement with Texas Energy Future Holdings Limited Partnership (TEF) in early October. TEF is led by a group of investors including Kohlberg Kravis Roberts & Co. (KKR), Texas Pacific Group (TPG) and Goldman Sachs Capital Partners.
With the completion of the $32 billion buyout, TXU Corp. changed its name to Energy Future Holdings Corp. Shares of TXU common stock, which were listed on the New York Stock Exchange and the Chicago Stock Exchange, ceased trading and were delisted. Under the terms of the merger agreement, TXU shareholders were entitled to $69.25 in cash for each share of TXU common stock held. Lehman Brothers, Citigroup and Morgan Stanley became equity investors at closing. Completion of the merger agreement marks the final step in the transformation into a privately held company.
Energy Future Holdings Corp., a holding company, will continue the transition of its businesses into three separate and distinct business units with separate boards, management teams, and headquarters: TXU Energy, a competitive electricity retailer; Luminant, a competitive power generation business; and Oncor, a regulated electric distribution and transmission business. Headquarters for each of the three businesses will remain in the Dallas/Fort Worth area.
AEP Reaches Settlement Agreement in NSR Case
American Electric Power (NYSE: AEP) reached a settlement agreement with the U.S. Environmental Protection Agency, eight states and 14 environmental organizations in early October, bringing an end to almost eight years of litigation regarding alleged violations of the New Source Review (NSR) provisions of the Clean Air Act. AEP admits no violations of law, and all claims against AEP were released.
In the settlement, AEP agreed to annual sulfur dioxide and nitrogen oxides emissions limits for its fleet of 16 coal-fueled power plants in Indiana, Kentucky, Ohio, Virginia and West Virginia. The company agreed to install additional emissions control equipment on two plants.
AEP will provide $36 million for environmental projects coordinated with the federal government and $24 million to the states that were parties to the agreement for environmental mitigation. AEP will pay a civil penalty of $15 million.
The NSR provisions require new major sources of emissions or existing sources that undergo major modifications to install additional environmental controls. The complaint alleged that AEP made major modifications at some of its coal-fueled generating units without obtaining the necessary permits and without installing controls required by the Clean Air Act to reduce SO2, NOx and particulate matter emissions.
Since 2004, AEP has spent nearly $2.6 billion on emissions control equipment on its coal-fueled plants as part of a larger plan to invest more than $5.1 billion by 2010 to reduce the emissions of its generating fleet.
Puget Energy Signs Merger Agreement with Consortium of North American Infrastructure Investors
Puget Energy (NYSE:PSD), the parent company of Puget Sound Energy, a regulated utility providing electric and natural gas service to the Puget Sound region of western Washington, announced in November that it has entered into a definitive merger agreement with a consortium of long-term infrastructure investors. The consortium is led by Macquarie Infrastructure Partners, the Canada Pension Plan Investment Board and British Columbia Investment Management Corporation, and also includes Alberta Investment Management, Macquarie-FSS Infrastructure Trust and Macquarie Bank Limited.
Under the terms of the definitive merger agreement, the consortium will acquire all of the outstanding common shares of Puget Energy for $30.00 per share in cash and assume approximately $3.2 billion of Puget Energy redeemable securities and outstanding debt obligations (estimated at completion). The transaction has an enterprise value of approximately $7.4 billion. Upon completion of the merger, Puget Energy common stock will cease to be publicly traded. The company will be owned by the consortium and continue to operate as Puget Energy Inc.
The transaction has been approved by the board of directors of Puget Energy and boards of the consortium members. The transaction is expected to close during the second half of 2008, subject to approval by Puget Energy’s shareholders and certain regulatory approvals, including those from the Washington Utilities and Transportation Commission and the Federal Energy Regulatory Commission.
Eight Utilities Join Clinton Global Initiative
Eight utility companies will work with the Clinton Global Initiative to address climate change. The utilities have committed to seek regulatory reforms and approvals to increase their investment in energy efficiency by $500 million annually to about $1.5 billion annually. This increased level of investment in energy efficiency, when fully implemented in 10 years, is projected to reduce carbon dioxide emissions by about 30 million tons.
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Pepco Holdings Inc., Consolidated Edison Inc., Duke Energy, Edison International, Great Plains Energy Inc., PNM Resources, Sierra Pacific Resources and Xcel Energy, representing nearly 20 million customers in 22 states, have also committed to the creation of a national institute for electric efficiency to develop regulatory models and convene supporting conferences in the power sector. This institute would be formed within the Edison Electric Institute, which represents the nation’s investor-owned electric utilities.
North American Electricity Demand Continues to Outpace Resource Growth; Reliability Concerns Remain
Electricity usage in the United States is projected to grow more than twice as fast as committed resources over the next 10 years, the North American Electric Reliability Corporation (NERC) announced in its 2007 Long-Term Reliability Assessment. Unless additional resources are brought into service, some areas could fall below their target capacity margins within two or three years. In parts of western Canada, demand is projected to outpace resource growth within about two years.
“We are at the stage where emergency situations are becoming more frequent,” said Rick Sergel, president and CEO of NERC. “Though some improvements have been made, we are requiring our aging grid to bear more and more strain, and are operating the system at or near its limits more often than ever before.”
Specific reliability findings, as detailed in the report, include:
- The challenges of integrating new wind, solar and nuclear generation resources into the bulk power system.
- Concern for capacity margins.
- Projected transmission addi-tions that lag demand growth and new generation additions in most areas.
- The aging workforce.
- Natural gas reliance as a fuel for electricity generation in Florida, Texas, the Northeast and Southern California.
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The 2007 Long-Term Reliability Assessment analyzes the adequacy of the North American bulk power system through 2016 and calls for actions to improve reliability. The report is available at www.nerc.com.