What's good for the environment is good for Wall Street

"We didn’t want to be on the wrong side of history."

A Buyout Deal That Has Many Shades of Green

By ANDREW ROSS SORKIN, New York Times

About two weeks ago, Fred Krupp, the president of a nonprofit advocacy group called Environmental Defense, received an unusual phone call.

William K. Reilly, the former administrator for the Environmental Protection Agency under President George H. W. Bush, was on the other end. But before Mr. Reilly would explain the reason for his call, he said he needed an assurance from Mr. Krupp that he would keep the conversation confidential.

After receiving such a pledge, Mr. Reilly dropped a bombshell: the TXU Corporation, the Texas energy giant that had become the whipping boy of the nation’s largest environmental groups, was in talks to be sold to a group led by Kohlberg Kravis Roberts & Company and Texas Pacific Group, two large private equity firms.

Mr. Reilly, who works for Texas Pacific, said he wanted to negotiate a cease-fire. If the investors succeeded in taking over TXU, Mr. Reilly said, they would commit themselves to scale back significantly on TXU’s plan to build 11 new coal plants and adhere to a strict set of environmental rules. In return, he wanted the support of Mr. Krupp and his peers, who had spent the past several months waging a bitter and public war against TXU.

Early Monday, after several weeks of marathon negotiations that brought together both environmentalists and Wall Street bankers, TXU announced that its board of directors had approved the bid from Kohlberg Kravis and Texas Pacific for about $45 billion, which would be the largest buyout in history.

The deal was noteworthy not just for its size, but for the confluence of business decisions and environmental concerns that drove the ultimate transaction. Because private equity firms are unregulated and historically have valued their privacy, neither Kohlberg Kravis nor Texas Pacific were eager to become an "enemy combatant" of the environmental groups, people involved in the talks said. Reducing the coal plant initiative will also free up billions of dollars in planned spending that the firms will be able to use for other projects or to help finance the transaction.

(The rest is here.)