- When William K. Reilly was plotting the private equity takeover of Texas utility TXU Corp. (TXU ), he foresaw one potential dealbreaker. It wasn't the money. The two main investors--Texas Pacific Group, where Reilly is senior adviser, and Kohlberg Kravis Roberts & Co.--wouldn't have any trouble financing the $45 billion deal. Nor was it about getting regulatory approval. Instead, says Reilly, "we decided the walk-away issue for us was not getting environmentalists' support."
So Reilly called Fred Krupp, president of Environmental Defense, whose Texas attorney, James D. Marston, had been waging an all-out war on TXU's plans to build 11 coal-fired power plants. Krupp told Marston to hop on a plane to San Francisco for a top-secret meeting with Reilly's team. "I ran home, got a suit, took the dog to a kennel, and told my wife I loved her but couldn't tell her what it was about," says Marston.
The ensuing negotiations were often tense. Enviros referred to TXU's expansion plans as the "Mein Kampf of the global warming wars." When Reilly heard that, he recalls telling his colleagues: "'This will be harder than I thought." After a marathon 17 hours, Reilly ended up giving Marston a big chunk of what he wanted: commitments by the new TXU owners to ax 8 of the 11 proposed plants and to join the call for mandatory national carbon emissions curbs. Meanwhile, the corporate raiders got exactly what they craved: public praise from Environmental Defense and the Natural Resources Defense Council (NRDC) for the deal.
Read a related article from Monday on the TXU buyout.
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