Environmental Defense Fund and the Leveraged Buyout of TXU
In 2006, the regional director for Texas' Environmental Defense Fund (EDF) was on his way to a hearing about permits for new coal plants proposed by Texas electricity provider TXU when he received a call from private equity firm Texas Pacific Group, concerning TXU's plans to build 11 new coal-fired power plants. How could he negotiate with the private equity firm as it pursued the largest recorded leveraged buyout deal? The private equity firm was opposed to acquiring a firm embroiled in a pitched battle with environmentalists, and claimed to be willing to make substantial concessions. However, as an environmental non-government organization, EDF would face significant risks if it elected to work with TXU and private equity firms to facilitate this deal. Should EDF support the buyout, and what concessions should it ask for in return?