TXU Building 11 Coal Plants Just 'Under the Wire' Of New Regulations?

by: Mick Weinstein

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

As Emission Restrictions Loom, Texas Utility Bets Big on Coal

  • Summary: As utility companies reluctantly accept the contribution of coal-fired power plants to global warming, they await new federal regulations on CO2 emissions under discussion in Congress. Dallas-based TXU, however, is building 11 big Texas power plants that will use the most problematic of fuels: pulverized coal. Its $11 billion project is being rushed forward, critics contend, so as to be finished just before the new regulations come into effect on forthcoming plants. Other major utility companies, such as American Electric Power, Xcel Energy and Duke Energy, have proposed 'cleaner' plants that release less CO2 and allow greater control over emissions (one type is called 'gasification', but it's more expensive). Once TXU's new plants are running, the company's annual emissions will more than double (to 133 million tons), but it stands to grow earnings by more than $1 billion/year. The U.S. produces almost 25% of the world's CO2 emissions; power plants are 39% of the U.S. emissions, and 80% of that is from coal-burning energy plants. Some states have begun incentivizing energy producers to reduce emissions -- among the companies taking advantage of this are PG&E, Mirant and BP.
  • Comment on related stocks/ETFs: Will environmentalists, emboldened by Al Gore's new film, move to stop TXU's massive new construction? Power outages due to this summer's record heat, meanwhile, have illustrated the need for more electricity. Just three days ago, we noted that coal producers stood to benefit from the new demand, and listed a number of companies that are particularly well positioned, from miners to power plant contractors such as ABB Ltd. (NYSE:ABB)