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Monday, February 26, 2007

Barbarians at the Smokestacks

Due to pressure from environmental groups and citizens of Texas, the buyout group led by Kohlberg Kravis & Roberts (KKR) in the $32 billion bid for Dallas utility TXU has agreed to cancel the construction of 8 out of the 11 planned coal-burning power plants - a decision that is sure to set a president for future buyout deals. The buyout and decision to invest in cleaner technologies comes several months after TXU defied public demand for fewer coal-burning plants and the retrofitting of old plants with better technology. The deal, which if approved would surpass KKR's buyout of RJR Nabisco as the largest in history, is sure to cause "shock waves" from Wall Street to Washington, as the article noted.

A few months back, TXU's CEO had admitted that there were benefits to pollution reduction technologies such as coal gasification which burns 70 to 90 percent cleaner than the conventional plants TXU planned to build, however, he stated that due to the increasing demand for power, they were putting their plans for that technology on the back burner. Its funny how many public companies still are not grasping the new democracy led by the increasing influence and power of new media.

Gone are the days of F. Ross Johnson and other free wheeling, free spending CEOs who get away with spending shareholder dollars frivolously and only care about the bottom line. Lee Scott of Wal-mart is a perfect example of the CEO 2.0 - a leader who listens to the public's concerns and integrates the demand for change into the business model - making the shareholders, stakeholders, and the public better in the end.

Energy Consultant Geoffrey Styles said on his blog, Energy Outlook, that Al Gore and his documentary played a role in the KKR decision:

“The indirect connection is obvious: climate change has become one of the biggest issues of our times, and both of these events reflect that reality,” he writes. “At the same time, it’s tempting to see a causal link between the influence of Mr. Gore’s documentary and the recognition by KKR and its partners that stakeholder concerns about the global-warming impact of TXU’s coal power plant construction program could put their entire transaction at risk.”

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