February 26, 2007

TXU Expects to Keep Same Lobby Lineup
at Texas Capitol as Planned Buyout Unfolds

By Mike Hailey
Capitol Inside Editor

TXU Corp. plans to keep its current team of lobbyists at the Texas Capitol intact even though its lobby goals and strategy may change as a result of the proposed sale of the Dallas-based electric utility to a group of private investors in a buyout that would be the largest of its kind in the nation's history.

The news of the $45 billion deal caught TXU's internal and outside lobbyists by surprise as they were preparing to go to bat in the Legislature for the company in its push for permits to build 11 coal-fired power plants around the state. But the private equity firms that have offered to buy TXU have promised to abandon plans for all but three of the coal plants in a move that would force the company to find other sources of power to meet the needs of its customers.

The TXU lobby team - one of the largest and most influential collection of lobbyists in Austin - will be working on dual fronts with transmission rates under the new owners subject to approval by the Public Utility Commission while state lawmakers press for information on how the buyout would affect electricity prices, the power supply and air quality.

While TXU's representatives in Austin will be shifting gears and retooling gameplans while the proposed sale is pending, the state's largest producer of electricity doesn't expect any wholesale changes in the lineup of lobbyists that it has assembled for the regular session this year. TXU has 60 lobbyists registered with the Texas Ethics Commission to look out for its interests at the state level this year. While the TXU lobby list includes some company executives and others who will have minimal roles in the overall effort, about two dozen lobbyists in Texas will be representing the firm on a day-to-day basis during the remaining three months of the session.

Former Texas House member Curtis Seidlits leads the TXU lobby force at the Capitol while Paul McKaig heads up a group of lobbyists who focus on the PUC, where the firm's distribution rates will be decided if and when it gains permission from the Nuclear Regulatory Commission, the Federal Energy Regulatory Commission and the Federal Trade Commission for the proposed ownership change.

TXU's team includes a battery of in-house lobbyists who are based in Austin including Paul Blanton, Marc Burns, Rudy Garza, Travis Jernigan, Elizabeth B. Jones, James Keller and Mark Malone. Several more full-time employees who work out of company headquarters in Dallas or other TXU offices are also registered with the state as lobbyists.

TXU has beefed up its effort with the addition of former Dallas Mayor Ron Kirk and ex-state House members Paul Sadler and Toby Goodman to the group of outside lobbyists that it has on contract in 2007. Sadler, an East Texas Democrat, chaired the Public Education Committee until leaving the House four years ago when he chose not to seek re-election. Goodman, who represented Arlington for 16 years as a Republican, is making his debut as a lobbyist after before losing his bid for re-election in November. His daughter, Christie Goodman, is teaming up with her father in a new lobby shop and signed on to represent TXU as well.

The power company's lobby team also includes former House members Eddie Cavazos and Keith Oakley, ex-PUC Commissioner Dennis Thomas, former Railroad Commissioner Barry Williamson and other hired guns such as Bryan Eppstein, Chris Shields, Ron Hinkle, Leigh Ing and Raul Liendo.

The new owners at some point might bring some of their own lobbyists into the mix. The Texas Pacific Group, which is led by Texan David Bonderman, and Kohlberg Kravis Roberts & Co. have been identified as the main players in the group of proposed buyers along with the New York-based investment banking firms of Goldman Sachs, Lehman Brothers, Citigroup and Morgan Stanley.

Bonderman, who has homes in Fort Worth and Aspen, founded the Texas Pacific Group in the late 1990s after stints as a securities lawyer in a Washington firm and a chief financial advisor to Fort Worth billionaire Robert Bass. Bonderman used the private hedge fund for leveraged buyouts and restructuring at Continental Airlines, Del Monte Foods, Burger King, Ducati Motorcycles, J. Crew, America West Airlines and a long list of other corporations.