TXU's banks, shareholders targeted over coal plans

New York, 14 December: Rainforest Action Network (RAN) has written to 54 private sector banks, asking them to decline to help finance a major expansion of TXU's coal-fired generating capacity.

Meanwhile, seven pension funds have filed shareholder resolutions with the US utility, asking the company to take action on carbon dioxide (CO2) emissions.

Earlier this year, the Dallas-based utility announced plans to build 11 coal plants, with a total capacity of more than 9,000MW, by 2010. While it pledged to control or offset other pollutants, TXU did not include plans for carbon control.

RAN, a US NGO that has successfully campaigned to force US banks to implement environmental policies, is calling on banks around the world to steer clear of the $11 billion project financing, which is being led by Morgan Stanley and Citigroup.

"As public concern over climate change continues to mount, banks need to consider reputational risk issues if they choose to finance this project," RAN said in an investor briefing note.

"Rainforest Action Network, CERES, Environmental Defense and others have been contacting potential financing banks in North America, Europe and Japan, raising very serious concerns and warning them against support for this project due to its massive greenhouse gas emissions and failure to meet basic principles of common sense when it comes to climate change," the group added.

Other investors share the pressure groups' concerns. In early December, TXU received shareholder resolutions from three institutions: the Connecticut Treasury; the Benedictine Sisters; and the New York City Comptrollers' Office, overseeing five funds for city employees. The groups own more than 1.7 million shares of TXU stock, worth almost $95 million.

The New York City resolution stresses US momentum toward regulation of carbon emissions, and asks that a committee of independent directors report on "how the company is responding to rising regulatory, competitive, and public pressure".

The Benedictine Sisters note the plants would increase TXU's CO2 emissions from 55 million tons in 2004 to 133 million tons in 2011. They cite reports on the superiority of installing CO2 capture through gasification now, over adding controls later. The Sisters ask the board to adopt a target to reduce CO2 below 2004 levels.

Connecticut asks TXU to study how energy efficiency could address expected increases in power demand, and how proposed conservation measures in Texas could affect demand for power from its new plants.

TXU spokeswoman Kimberly Morgan said the resolutions will be summarised in the spring proxy statement, along with board recommendations on voting at the company's annual general meeting (AGM) in May. She noted TXU's recent statements that it would prepare the plants for CO2 capture, and a minority investment by TXU in Skyonic Corporation, which is developing CO2 controls, announced on Tuesday.

Shareholder resolutions of this type rarely lead to defeat for company management at AGMs. However, they do put pressure on companies to act, and AGM votes of "anything above 20% is pretty significant," said Dan Bakal, director of electric power programmes at Ceres, a Boston-based investor coalition.

A number of utility GHG resolutions have hit that mark, and some have been withdrawn when companies agreed to take steps, he noted.

While TXU avoided the CO2 issue when it announced plans for the plants, pressures from shareholders and analysts "have forced them to talk about it," Bakal added. "But TXU is still far from dealing with the issue."