June 28, 2008
Energy Future CEO Says Owners Expect Industry Growth
By Elizabeth Souder, The Dallas Morning News
Jun. 28--The new chief executive of Energy Future Holdings answered a long-burning question on Friday: Why would private equity companies want to buy a Texas utility?John Young, who's been head of the Dallas power company since January, said the companies that bought the former TXU Corp. last year expect the energy industry to grow.
"This industry is going to be in growth for some time," Mr. Young told the Dallas Friday Club.
Plus, he said, the private equity buyers, Kohlberg Kravis Roberts & Co. and TPG, expect to improve operations enough to boost cash flow.
That will allow them to pay off the $29 billion in debt they took on to buy the company.
Cash is extremely important for Energy Future Holdings these days.
Mr. Young said with his last job as chief financial officer for Chicago's Exelon Energy Corp., he had some flexibility with cash flow. The publicly traded company had a $10 billion credit line.
At EFH, that's not the case.
"I'm measuring how much cash I have in the bank on a momentary basis," said Mr. Young, who grew up near Pensacola, Fla.
He also articulated for the first time the company's approach to carbon dioxide regulations: efficiency.
Most observers expect Congress to pass some sort of limit to greenhouse gas emissions soon, and such laws could heavily affect Energy Future, which owns a dozen coal-fired power plant units.
Back in March, William Reilly, chairman of EFH's Sustainable Energy Advisory Board and its corporate board, said it was itoo early to set a strategy for regulations that hadn't been passed.
The new chief executive is taking an approach similar to that of Exxon Mobil Corp. by operating carbon dioxide-spewing equipment more efficiently. That cuts down on the amount of greenhouse gas emissions per megawatt hour of electricity output.
He's interested in both small and large efficiency gains, from simply changing out a pump in a coal plant, to installing equipment to clean the coal before it's burned.
Energy Future is considering building a coal gasification plant that captures and stores carbon, though the company hasn't committed to the investment.
Mr. Young said EFH might also build nuclear power plants, which do not emit carbon dioxide when operating.
EFH's Luminant unit plans to file an application in September for licenses to build and operate two new reactors at the Comanche Peak nuclear power plant.
Still, Mr. Young said, it will be years before the company decides whether it will actually build the plants.
Mr. Young's last company, Exelon, operates the largest fleet of nuclear power plants in the country and is considering building a reactor in Texas.
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