Molly Ivins once said “The thing about democracy, beloveds, is that it is not neat, orderly, or quiet. It requires a certain relish for confusion.”

I think she could have said the same thing about the recent machinations over the TXU coal power plant deal thats been unraveling over the past month. Sometimes, it looks like everything could go one direction, when suddenly it all veers in the other, like a quick wind change with a coming storm. We try to communicate it to all of you and sometimes it comes out jumbled because…well…things are constantly changing. I hope this post helps fill in the holes for some of you out there and helps take the “wonkiness” out of the bank-speak that seems to surround our work on this campaign.

There are many different theaters of operation, if you will, when it comes to groups that are opposed or challenging TXU’s proposal to build these 11 new dirty coal plants. And why not, since they will potentially emit more than 78 million tons of CO2 into our already warming global atmosphere. Besides the legal, legislative and grassroots theaters, there is RAN’s specialty, the financial theater. Or, to put it plainly, RAN is working to convince banks not to fund these coal power plants. And we are also pushing Wall Street to shift its approach to climate change issues, and to commit to a policy of “No New Coal.”

Recently, a coalition of private-equity firms, led by Kohlberg, Kravis and Roberts & Company (KKR) and Texas Pacific Group offered to buy TXU for $43.8 billion (including $12 billion in debt) which would be the largest leveraged-buyout in history. Private equity is an explosive new form of investment that’s attracting lots of attention and lots of money. For a quick overview of private equity and its impacts check out this video at CNN Money (Windows Media Player). Or read the overview on Wikipedia. The other firms involved in the buyout proposal include Goldman Sachs Group, JPMorgan Chase, Citi, Morgan Stanley and Lehman Brothers. Citi, Morgan Stanley and Merrill Lynch were some of the original “arrangers” for TXU when it was looking for loans ($11 billion) to build these coal plants.

The proposal by this coalition of private-equity firms is not the only one TXU has to consider. As part of their arrangement with KKR and Texas Pacific, they have until April 16 to field other offers. A few days ago, Swiss bank Credit-Suisse agreed to finance additional offers, and TXU CEO John C. Wilder has reported that they hope to recieve dozens of additional offers. So, there’s no guarantee that the KKR/Texas Pacific/Goldman Sachs/JPMorgan Chase/Citi/Morgan Stanley/Lehman Brothers consortium will be the winning bidder – nor is there any guarantee that the proposal to withdraw 8 of the 11 power plant permit applications will be respected by other buyout contenders.

There are several ways this could all break down.

Possiblity #1: TXU Gets Bought Out

The original proposal from KKR and their coalition of private-equity groups is ultimately the prevailing bid, which would turn the giant utility into a privately-owned utility. Currently, TXU is owned by its shareholders and its shares are publicly traded. As a private-equity firm, TXU would be less regulated and therefore less scrutinized. Or, TXU could be bought by another firm, funded by Credit-Suisse, and KKR and company would have lost the “deal of the decade.” In either situation, it appears that the original $11 billion that TXU was seeking to fund their power plants could be available to the new owners as a line of credit. The key aspect to this is WHO buys TXU. If it’s KKR and the coalition of private-equity groups, chances are they will drop the attempt to get permits for 8 of the 11 proposed coal power plants (which is good, but we plan to continue to support our local allies who are working to fight and defeat the remaining 3 power plants as well). If another firm, like the Carlyle Group (which is rumored to be interested) makes the deal, there’s a real threat that those plants could be built as planned.

Possibility #2: TXU Doesn’t Get Bought Out

Going back to its original plan, TXU could actually find funding for its 11 proposed dirty coal power plants and continue functioning as an energy company with a few more billion in debt. A few permits later, and the plants would be built. This is also when the legal and legislative theaters of operation (cue NRDC) get really busy pressuring lawmakers to shut down the proposal. And the original banks arranging the $11 billion loan for the 11 plants would be back in the limelight – if by then Citi, Morgan Stanley and Merrill Lynch still think that funding 78 million tons of CO2 to be dumped into the atmosphere is an acceptable idea.

That’s the long and short of it… for now. One thing I’m learning in this work is how quickly things change. The banking industry is also notoriously hush-hush on the wheeling and dealing they perform. Although a relationship between two business partners should be, on some levels, confidential, the public deserves to know about it when that relationship affects the climate and environment that all 6.5 billion of us live in.

RAN has been in negotiations with many of the banks listed on the initial offer by KKR, including Goldman Sachs Group, JPMorgan Chase, and Citi. We’re currently trying to bring Lehman Brothers to the table (if they’re smart they’ll talk to us).

We’ll keep you updated on the TXU situation. Thanks for your support for our work so far.