Most of us in Texas are enjoying the abnormally cool weather that has graced us during a period in which we are usually already looking for a way out of the summer heat box. There are, however, a few people who are happy to see that hot weather is finally approaching.
For electric companies relying on consumers to crank up their air conditioners, the first few months of summer have been a disappointment. For TXU (NYSE: TXU), the unusual weather in Texas couldn’t have come at a worse time, as they are on the fringe of a buyout.
The company has seen profits fall 76 percent during the second quarter of 2007, which shifts power into the hands of Kohlberg Kravis Roberts & Co., an investment company seeking to buy TXU.
Kohlberg Kravis Roberts & Co. have made it very clear that it does not intend to “up the ante” to buy the company, even though TXU’s largest shareholder has placed calls for a higher bid.
Franklin Templeton Investments, TXU’s largest investor, stated last month that the offer is too low, in light of improvements in the share price of some of TXU’s rivals. Franklin holds around 5 percent of TXU stock.
Oddly enough, shares of TXU rose to $64.16 this morning, despite the poor quarterly result. This probably means the market thinks the deal now has a better chance of actually getting done. If the deal does go through, shareholders will be entitled to $69.25 per share, as promised by the private investors.
TXU’s net income fell to $121 million from $469 million in 2006. Included in this figure is the $320 million for suspending plans to build eight coal-fired power plants, and for the company’s hedging program, used to protect TXU from commodity markets. The company earned 93 cents per share, missing its goal of $1.17 per share.
Due to the weather and scheduled maintenance on one of its nuclear reactors, TXU generated much less power this year than last, with net energy supply falling 0.7 percent to 21,068. As a result, revenue also dropped from $2.67 billion to $2.01 billion from 2006 to 2007.
Despite the plea from Franklin, as of now buyers haven’t indicated that they will increase the bid to own TXU Corp.
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