TXU To Form $8.7 Billion Joint Venture: TXU is testing broadband-over-powerline and automatic meter-reading technology

TXU To Form $8.7 Billion Joint Venture

POSTED: 1:28 pm CDT June 26, 2006
UPDATED: 1:31 pm CDT June 26, 2006
DALLAS -- TXU Corp.'s electric subsidiary will pay a joint venture formed with another energy company $8.7 billion over 10 years to manage its electric-transmission system, a deal the utility hopes will improve service and provide new profits.

TXU said Monday that the new venture, InfrastruX Energy Services, should begin by year end, subject to the restructuring of more than $200 million in debt by TXU's partner in the 50-50 deal, InfrastruX Group.

The joint venture will maintain TXU's power lines and design and build new transmission facilities. TXU will continue to own the lines.

TXU is testing broadband-over-powerline and automatic meter-reading technology that could create more work for the joint venture, officials said.


Tom Baker, chairman and chief executive of TXU' electric delivery subsidiary, said the agreement should improve reliability by augmenting TXU repair crews with those of InfraStrux. He said it would also save TXU $100 million over the cost of doing the work itself.

Still, the savings appear to be a small payoff for such a large outsourcing deal. Baker said the joint venture could be profitable if it brings in more business by providing construction and power-restoration work for other utilities.

"What you may get is growth over time," he said. "It depends on how much growth of that they're able to get. That can improve some of their profitability. We hope the joint venture can be profitable."

Dallas-based TXU said its electric delivery unit would focus on long-range planning and operations of the transmission system.

TXU, the largest electric utility in Texas, said the deal would not materially affect its operating earnings in 2006 or 2007.

The joint venture will be led by Michael T. Lennon, InfrastruX's president and chief executive officer. Lennon said the venture would be financed by refinancing InfrastruX debt, then by traditional equity and debt financing.

TXU said several of its senior executives would join the joint venture's management. The new outfit will have about 2,000 TXU employees and 3,000 from InfrastruX.

TXU expects to keep only about 1,400 people in its electric-delivery unit. Of the 2,000 moving to the joint venture, about 175 are union members, and the company will begin bargaining with them over terms of the change, officials said.

Through its subsidiaries, parent TXU has about 2.3 million electricity customers in Texas and generates more than 18,300 megawatts of power from nuclear, coal and natural gas-fired plants. The company recently announced plans to build 11 new coal plants.

Shares of TXU rose 50 cents, to $56.46 in afternoon trading on the New York Stock Exchange.

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