Monday, February 26, 2007

TXU Theft or Just Opportunistic

TXU Corp (NYSE:TXU) is to be acquired in a mega private equity deal. Shareholders appear to be big winners. Environmentalists also should be happy with plans to cancel and or stop approximately eight coal fired plants which of course reduces future pollution.

The announcement does a hard sell on a planned 10% price reduction for residential customers reportedly reaching $300 million. The price protection will be extended to September 2008. Does this mean that when the inevitable IPO comes to market there will be lots of room for price increases?

The cancellation of eight coal fired power plants is also interesting. I assume that they were needed in the first place. Are the remaining three plants or other facilities to be expanded dramatically? I do not pretend to understand carbon emissions credits but is there a windfall for TXU as they now have more than before.

The wealth technique is buy low sell high. KKR, Goldman Sachs and TPG understand the procedure perfectly. Are the investors being penalized by self-inflicted short-term thinking?