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Market News

 February 27, 2007
TXU Deal Will Ripple Through Energy Industry

 Washington, USA -- The private-equity buyout of TXU, and the subsequent stop to construction plans for eight new coal-fired power plants, will have a major effect on other energy companies and their financers that plans to build new coal-fired power plants in the U.S.

Innovest Strategic Value Advisors, a financial research firm, and the National Environmental Trust today highlighted how the decision by the Wall Street investment firms behind the TXU buyout means that the financial/environmental risk warning light is now flashing at Dynegy, LS Power, Peabody Energy, Excel, Dominion and other firms with plans to build multiple coal-fired power plants.

During a press briefing, NET Coal Campaign Director Peter Altman said, "The climate dodged a bullet with the cancellation of these TXU plants. An inconvenient truth remains however. There are still more than 100 other coal-fired power plants on the drawing boards nationwide and the financial climate has changed. The TXU deal shatters the aura of invincibility many coal plant developers have assumed, by showing that the growing extent and diversity of opposition can stop plants that will make global warming worse."

Wall Street and Capitol Hill policymakers are already looking at whether building plants whose carbon cannot be easily controlled is in our national interest. Senate Energy Committee Chair Jeff Bingaman (D-N.M.) has been raising the issue in public statements, including an op-ed co-written with Environment and Public Works Chair Senator Barbara Boxer (D-Calif.).

Eric Kane, an analyst at Innovest, said this his company recently highlighted the risks to investors from TXU's expansion plans. "Although the TXU case was unique in its proposed scale, the challenges faced are indicative of a growing trend throughout the utility industry," Kane said, and added that "the lessons learned from TXU will have national implications. Industry peers will face similar challenges as they move forward with expansion strategies that rely on new power plants that utilize outdated, highly polluting pulverized coal technology."

Speakers at the briefing discussed which companies may be the "next TXU" for trying to build an expensive new fleet of coal plants without the means to control carbon pollution.

If a planned merger with LS Power goes through, Dynegy will be the biggest developer of new coal plants with no carbon controls in the country. According to a NET analysis of Department of Energy data, Dynegy and LS Power together have an expansion plan on a similar scale to TXU. Assuming the planned merger occurs, Dynegy will build 9,465 MW of new coal fired capacity in 11 states.

Altman added that "Every new coal plant built without a way to control carbon puts us on the fast-track to the most serious climate consequences. Congress should block traditional coal plants not equipped to control carbon from moving forward since they will make it harder to limit the damage global warming causes."

Other firms with multiple coal-fired power plants still on the drawing board include:
  • Peabody Energy, with 3 projects in development for a total of 3,300 MW in 3 states;
  • NRG, with 4 projects in development for a total of 2,730 MW in four states, including some gasification plants;
  • Excel Energy has 4 projects in development for a total of 2,350 MW in 3 states, including some use of gasification;
  • TXU itself has 3 projects remaining in development for a total of 2,320 MW in Texas;
  • Duke Energy, with 2 projects in development for 2,350 MW in 2 states, including some gasification;
  • Dominion Energy has one project in development for a total of 2,150 MW in an undetermined location.