This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TXU Sparks Takeover Talk

This column was originally published on RealMoney on Feb. 26 at 12:00 p.m. EST. It's being republished as a bonus for readers. For more information about subscribing to RealMoney, please click here .

As TXU (TXU) heads to the world of private companies, the utility space will likely be re-energized by talk of more deals, either in private-equity buyouts or public-company mergers.

Such chatter will inevitably occur today, and given the industry's stable nature, the "what-if" exercise is worth considering. However, the complexities of the electric power business make big deals challenging, if not downright difficult.


Utilities have a great profile for private-equity firms: stable cash flow, predictable demand and a captive customer base, to name just three. But they also entail a significant amount of regulatory risk.

Although deregulation of the power business has helped lessen some onerous regulation, most electric-power companies' core businesses remain highly regulated, primarily by state public utilities commissions and, at least to some extent, by the Federal Energy Regulatory Commission.

If you wonder what that means, just ask Constellation Energy (CEG) and FPL Group (FPL). In October, the two companies walked away from a merger that had been in the works for nearly two years because of regulatory hassles. In addition, Exelon (EXC - Get Report) and Public Service Enterprise Group (PEG) canceled their proposed merger for similar reasons. Of course, some deals have been completed -- such as Duke Energy (DUK) and Cinergy -- but plenty of uncertainty exists when it comes to public utility mergers.

However, private equity's entrance into the mix may present new opportunities. It is too early to determine what type of hurdles the TXU deal will face from regulators, but objections are already being assuaged. The new TXU said this morning that it will lower consumer power rates and significantly reduce its plan to build new coal-fired generation plants.

In addition, the private version of TXU is courting heavy hitters for its board, including former Secretary of State James Baker, former EPA Commissioner William Reilly and former Commerce Secretary Donald Evans. Furthermore, the press release announcing the deal talks up the new company's commitment to the environment and sustainable energy.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CNL $53.54 0.04%
EDE $32.74 -0.97%
EXC $30.31 -2.60%
GXP $28.55 -1.28%
OGE $25.75 -1.87%


Chart of I:DJI
DOW 15,660.18 -254.56 -1.60%
S&P 500 1,829.08 -22.78 -1.23%
NASDAQ 4,266.8370 -16.7550 -0.39%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs