Investors Monday liked the planned $31.8 billion takeover of TXU, pushing shares in the Texas utility sharply higher, but environmental concerns could cause trouble ahead.
In what appear to be concessions, TXU says it will reduce the number of new planned coal-fired generation plans to three from 11 and cut rates 10% to save residential customers about $300 million a year, moves that could erode future earnings.
David Dreman, manager of Dreman Value Management in Jersey City, N.J. and owner of TXU shares, says the wild card in the deal is politics. CNBC’s David Faber first reported the deal was in the works Friday.
“There’s some risk,” he says. “They’ve cut back on the number of (new) plants, but I think that takes a lot of the environmental heat off.”
But it’s not enough to satisfy Karen Hadden, executive director of Sustainable Energy & Economic Development in Austin, Texas.