Coal powers most of the world by providing electricty and is also responsible for a large percentage of CO2 emissions. Even though there are efforts to create clean coal, energy companies need to have a better ‘green business strategy’.
In a previous post, there was a argument about how private equity may drive a “green business strategy”. This week’s TXU buy-out provides more evidence.
Matthew Wheeland, Managing Editor of GreenBiz, writes in this weeks newsletter about the unprecendented buyout of Texas energy utility TXU by Private Equity players.
The new owners announced that at least eight of the planned power plants would no longer be built, and that the new owners would increase TXU’s commitment to sustainability.
The Red Herring suggests that Coal is losing in this acquisition.
Some environmentalists are hailing this buyout as a possible win because it comes with an announcement that the company has given up plans to build eight of the 11 proposed coal-fired plants. The scale-back represents a 75 percent reduction in new coal capacity, or 56 million tons of annual carbon emissions, according to a TXU statement on the sale.
Executive Editor of GreenBiz Joel Makower said that the deal is a major development because the environment became a “top line negotiating point for utility acquisition.”
“I think it puts everybody on notice that carbon is an investment risk and that utility growth going forward needs to look beyond fossil fuels,” said Mr. Makower.
GreenBiz.com explains why this buy-out may provide a signal to other energy companies.
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will face similar challenges as they move forward with expansion strategies that rely on new power plants that utilize outdated, highly polluting pulverized coal technology.”
Update: Andrew Winston at Eco-Advantage talks about being “On the Right Side of History”.
