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Unformatted text preview: W rer storm that hit the Midwest on Saturday made its way east yesterday. dropping heavy snow on Manassas, Va“, above. Page A18. ioflslam A Buyout Deal That Has Many Shades of Green Trossroad ader Exits uacFARQIJI-IAR ’eb. 25 — Louis Farra- rting leader of the Na- ave what was billed as public address here on his extended illness sharp focus the ques- r the group will shift .‘nain— .‘1 t0 loses laI'lS- khan, ly ro- 1 who ma- six spent -hour icing j and : im~ 'resident Bush. ‘t want to impeach akhan said, “Censure ivorld something went leadership and we re- 'rongdoing.” e an appeal for reli- the address before II'Cl Field, home to the notball team, capping :ntion of Nation of Is- Louis Farrakhan .t major speech since health problems rn over control of the to an executive com- d on Page A16 By ANDREW ROSS SORKIN About two week ago, Fred Krupp, the president of a nonprofit advocacy group called Environmental De- fense, received an unusual phone call. William K Reilly, the former ad- ministrator for the Environmental Protection Agency under President George H. W. Bush, was on the other end. But before Mr. Reilly would ex- plain the reason for his call, he said he needed an assurance from Mr. Krupp that he would keep the con- versation confidential. After receiving such a pledge, Mr. Reilly dropped a bombshell: the TXU Corporation, the Texas energy giant that had become the whipping boy of the nation's biggest environ- mental groups, was in talks to be sold to a group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group, two large private equity firms. Mr. Reilly, who works for Texas Pacific, said he wanted to negotiate a cease-fire. If the investors Succeeded in taking over TXU, Mr. Reilly said, they would commit to scale back sig- nificantly on TXU’s plan to build 11 new coal plants and adhere to a strict set of environmental rules. In return, he wanted the support of Mr. Krupp . and his peers, who had spent the past several months waging a bitter and public war against TXU. Last night, after several weeks of marathon negotiations that brought together both environmentalists and Wall Street bankers, the board of TXU was moving toward a vote to accept the bid from Kohlberg Kravis and Texas Pacific for about $45 bil- lion, which would mark the largest buyout in history. The deal Would be a watershed not INSIDE {gle With Increasingly Violent Insurgency i’s military government began a policy of conciliation toward sis in the south several months ago, violence in the three take up the insurgency’s base has grown worse. F Awards erformance in “Lit- e" won the Oscar for actor in a field that die Murphy of THE wars, PAGE Bl Exiting the South me since the De- .mericans aged 75 een leaving the mg there, Census Bu- PAGE A12 PAGE Ali! Governors on the Fence Eight years ago, Republican gov- ernors rallied around George W. Bush's presidential candidacy early. But no such groundswell has oc- curred this year in either party. While a few governors have en- dorsed candidates, many say they are reserving judgment. PAGE ills A Bid for Energy Firm Included a Pact With Environmentalists just for its size, but for the conflu- ence of business decisions and envi- ronmental concerns that drove the ultimate transaction. Because pri~ vate equity firms are unregulated and historically have valued their privacy, neither Kohlberg Kravis nor Texas Pacific were eager to become an “enemy combatant" of the envi- ronmental groups, people involved in the talks said. Reducing the coal plant initiative will also free up bil- lions of dollars in planned spending that the firms will be able to use for other projects or to help finance the transaction. Within TXU, the controversial plan to build a raft of coal plants had become so damaging to its stock price that its board had been pri- vately weighing a plan to scrap part of its coal plant development project, according to people involved in the talks, bringing the number of new plants to 5 or 6 from 11. Shareholders had sent the stock on a roller coaster ride from more than $67 a share to as low as about $53 over concerns about the risk and vast expenditure; the stock closed at $60.02 on Friday. Indeed, it was the quick drop in Continued on Page A19 Training for India’s Job Boom And Finding Career Path to Sky 1. Adam Huggins tor The New York Times An instructor from the Frankfinn institute of Air Hostess Training shows her students the control panels inside the airplane’s cockpit. By SOMINI SENGUPTA NEW DELHI, Feb. 24 -— This is a story that Abhinanda Shukla, 25, is fond of telling at job interviews, so perfectly honed that it has the ring of an overdrawn fairy tale. As a child, she had flown only once, and was so riveted by the flight at- tendant that she determined to be- come one. Her father, a gas station owner in central India, was dead set against it. "He thought it was like be- ing a waitress,” she said. After months of needling, he re» lented. He said he would pay for the tuition at her preferred flight-attend- ant training school. Not only that, he would allow her to do what would orny has helped to transform the am- bitions, habits and incomes of India's middle class in ways that would have been unimaginable just a generation ago, not least for young women. One consequence of India’s new prosperity is a hunger among the young to pursue careers that Were simply unavailable to their parents, for wages that would have been be- yond their elders’ comprehension. A new crop of private airlines has provided one of the broadest avenues of opportunity, and their prolifera- tion is among the earliest and most tangible fruits of economic growth. Once entire-Iv rlnnnnrlnnt ha in. jot speec And on a presidt tee did i withdravi gades fro In an in ma said 1 ing the a distinguis Democrat In additio Edwards, Dodtl of ( Bitten Jr. thorize tht “The an only becai how peep] lems and merit they icy decis “There an lieve that 1 action, but tered into Mr. Ob ical of the on Oct. 11, before the vention in political as not place had voted roadside bo tured in It forensic c tial and inf The new red sensors vices and i explosives Americans signature outside Ira where He: used weap Americans TX U Bidders first [Wade a year With Envzronmenrausrs Continued From Page Al 'XU’s stock price that got the atten- .on of Kohlberg Kravis and Texas 'acific, which look for undervalued ompanies and try to turn them round. Together, both firms ap- roached C. John Wilder, TXU’s hief executive, in early to mid-Janu- ry with an offer for the company, lose people said. At the time, neither Kohlberg 'ravis nor Texas Pacific told TXU bout its ambition to scale back its introversial coal plants. But behind to scenes, both firms had been de- aloping a new strategy for the com- any with the help of Goldman achs, their lead adviser. Goldman Sachs has been a long— the proponent of reducing carbon .nissions. its former chief execu- ve, Henry M. Paulson, now the sec- :tary of the treasury, was also the iairman of the Nature Conservan- r, an environmental activist group. Texas Pacific's co-founder, David onderman, is member of the board :' the World Wildlife Fund, and Mr. eilly is chairman emeritus. Mr. onderman called Mr, Reilly to help ork on the deal and create what fey ultimately called “The Green roup” -— a committee of advisers tat included Mr. Reilly, Roger Bal- -ntine of Green Strategies and Stu- bOCialed Press Fred Krupp, president of the Envi» ronmental Defense Fund. art E. Eizenstat, the former chief do- mestic policy adviser for President James Carter. "We didn’t want to be on the wrong side of history," said a person in- volved in the bidding group who was not authorized to talk about the transaction before its formal an- nouncement, which is expected to- day. Under the terms of the deal, Kohl- berg Kravis and Texas Pacific will pay $69.25 a share for TXU, people involved said. Goldman Sachs, Mor— gan Stanley, Lehman Brothers and Daniel AckerfBloornberg News C. John Wilder, chief executive of the TXU Corporation. Citigroup are expected to take small stakes in TXU as well as help finance the debt with J .P. Morgan Chase. In addition, the investor group will as some more than $12 billion of TXU’s debt, And the group will be getting more than just a utility. TXU is in the midst of an experiment to run broad- band Internet over its power lines as part of a venture with Current Com- munications. Both TXU. which was advised by Credit Suisse. and the investor group spent weeks holed up in three confer» )eal’s Broader Effect on Coal Plants ls Uncertain By MATTHEW L. WALD WASHINGTON, Feb. 25 — The eal between environmental groups nd the investors seeking to buy the XU Corporation may stop that com- any’s construction of eight new 3al«fired power plants in Texas, but my have hardly any effect on the roader course of new power plants eing built, according to other par~ cipants in the battle over the Texas lants. Huge new plants will still be built, xperts say, because demand is ris- 1g and because new technology can se coal to make power more cheap- r than natural gas plants or other al- ernatives. Stopping a new genera- .on of coal plants will have to wait at government action on carbon di- xide, many of these experts say. ”There are eight other power Ilants proposed by other companies hat are now prepared to move unto he battlefield," said Tom Smith, an urganizer with Public Citizen in Aus- in, Tex, who is a leading opponent of the TXU plan. Mr. Smith said that backers of the other eight plants had already filed for permits, “but they have not been moving forward be- cause of the size of the TXU play." TXU had scared off some compet- itors by proposing eight plants, using the vast scale of the plan to cut down on engineering costs. Around the country, power compa- nies are planning more than 150 coal plants, although the stage of work varies wildly. TXU had contracts with equipment suppliers and an ar- chltectural and engineering firm; other companies’ plans are more tentative as they wait and see how demand develops, A decision by one company does not sway all the oth- ers, experts noted. 111 Dallas, Laura Miller, the mayor and leader of a coalition of municipal officials that has spent $600,000 fight- ing the TXU plants, said that the agreement with the national envi- ronmental groups might not get TXU as much help as it wanted. She point- ed out that one of the three surviving projects, a two-unit coal plant near Waco, had drawn a negative recom~ mendation from a panel of Texas ad- ministrative law judges because it would add to air pollution of the type - already regulated. It is still opposed by local officials. Ms. Miller said that she hoped the demise of the TXU plants, if that happens, would leave an opening for cleaner projects, like a proposal to build a power line to West Texas, where power producers propose to build big wind farms, backed up by coal and natural gas plants that would run when the wind was not blowing. ' And the research her group has al- ready done in fighting TXU might not go to waste, she said. Others could propose coal plants, possibly smaller than what TXU proposed, but “when these next guys step up by themselves with one plant, all this in- formation is marshaled and ready to use," she said. A controversial plan for 11 coal—burning plants is cut to three. ence rooms at the Gaylord Texan, hotel just outside of Dallas. With a1 mies of bankers and lawyers the frequently numbered more than 4! the group negotiated the buyout dea including an unusual provision the will allow TXU to seek higher rivz bids over the next 50 days. Thi clause could potentially create a bi( ding war, perhaps bringing other pr vate equity firms and utilities into a auction. But perhaps the most difficu talks were with the environmenta ists, who often seemed more lik Wall Street negotiators than gree activists. Mr. Krupp of Environmental D- fense used his conversation with M Reilly as an opportunity to negotia1 even harder for further concession The men agreed that Mr. Krupp lieutenant, James D. Marston, wt was leading the charge against TX in Texas, would meet with Mr. Reil and other representatives of the bu ing group. And representatives fro:- Natural Resource Defense Counc another climate-control advocat group, was brought into the discu ' sion to help formulate a plan that E sides could agree on. So last Wednesday, Mr. Marstt flew to San Francisco, where 1 found himself face to face with M Reilly over breakfast at the Mand rin Oriental hotel. There, ovn scrambled eggs and croissants, M Reilly laid out a plan that include reducing the coal plants from 11 to : Then the men went to Texas P cific's conference room overlookn Alcatraz and the San Francisco B: for a day-long negotiation th stretched until early the next mor ing. The group, which included M Reilly, Mr. Bonderman and Frede ick Goltz of Kohlberg Kravis, work: out a “10-point plan" that included commitment by the investors to r turn the carbon-dioxide emissions l TXU to 1990 levels by 2020 and so port a $400 million energy efficien: program. When an agreement was final struck, at 1 am. the next mornin Mr. Reilly grabbed a bottle of pin noir from his colleague’s office toast the group. But he couldn’t find : bottle opener. So he ran downstai back to the Mandarin Oriental to or ' row one. ADVERTISEMENT Argumentation: The Study of Effec ...
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