Innovest Strategic Value Advisors, a financial research firm, and the National Environmental Trust (NET) today highlighted how the decision by the Wall Street investment firms behind the private-equity buyout of TXU to kill plans for eight of 11 power plants in Texas 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.
Texas Pacific Group and Kohlberg Kravis Roberts & Co.have sought to acquire Texas-based energy giant TXU Corp. since April. As part of the sale agreement, Environmental Defense helped negotiate an aggressive environmental platform that will, among other things: terminate plans for the construction of 8 of 11 coal-fired power plants TXU had hoped to build; stop TXU's plans to expand coal operations in other states; endorse the U.S. Climate Action Partnership (USCAP) platform, including the call for a mandatory federal cap on carbon emissions; and reduce the company's carbon dioxide emissions to 1990 levels by 2020.
During a press briefing this afternoon, National Environmental Trust 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, analyst, Innovest Strategic Value Advisors, said: "In a recent Innovest Strategic Value Advisors report, we highlighted the investor risks associated with TXU's planned expansion strategy due to the rising construction costs and schedule delays. Although the TXU case was unique in its proposed scale, the challenges faced are indicative of a growing trend throughout the utility industry ... 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."
Which companies may be the "next TXU", 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: "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:
Environmental Defense mobilized an all-out grassroots campaign targeting TXU and Texas' Republican Governor Rick Perry. Nearly 50,000 Environmental Defense members and activists took action, sending emails, attending public hearings across Texas and submitting public comments against the plants. More than 50 community and environmental groups signed on to our letter urging TXU to change its course.
SOURCE: National Environmental Trust, Environmental Defense
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