TXU Energy Co. last Wednesday announced that its plans to form a 50/50 joint venture energy marketing and trading company with Credit Suisse First Boston have been called off (see NGI, May 24). After a detailed review of the proposed venture, the parties were “unable to agree on an economic arrangement that met each side’s strategic objectives,” TXU said.

The new business was expected to become the exclusive energy marketing and trading vehicle for both companies in North America, effectively creating an “Aa3/A+” rated entity through a guarantee from CSFB. The entity was expected to market and trade power, natural gas and other energy-related commodities throughout the continent.

When originally announced in May, CSFB said the deal would fulfill one of its top priorities, i.e., “to enter the energy commodities trading markets with a top flight physical energy producer.” TXU, meanwhile, was hoping the joint venture would reduce its risk by limiting its aggregate exposure to the marketing and trading business.

However, in the end the two companies found they couldn’t shoulder the costs and couldn’t agree on the terms of the venture. The formation of it was expected to be “cost prohibitive,” said a TXU spokeswoman. She said one of the more costly aspects of the deal was attracting solid marketing and trading personnel. The oil market apparently has soaked up many of the available marketers and traders. Many others also are now pursuing different career paths.

But the complexity of the proposed joint venture transaction also was a factor, said TXU spokeswoman Carol Peters. The two companies found out that they had different goals and objectives. TXU wanted to remain anchored in physical rather than speculative trading; CSFB apparently did not. “They couldn’t agree on the terms. It turned out to be more complex than originally thought,” said Peters.

TXU also noted that the performance of its generation fleet has improved markedly this year and the company is investing more in its operation. TXU also announced that it is moving its wholesale business in with TXU Energy. It will leverage its internal wholesale marketing and risk management capabilities to manage its purchased power needs and economically dispatch its generation fleet in the Texas market, the company said.

TXU and CSFB still expect to have an “effective working relationship” and “look forward to exploring other opportunities to work together in the future.”

Meanwhile, CSFB, said that it will continue to pursue the formation of an energy trading operation in house while also looking for strategic arrangements with other companies.

TXU Energy Promises Better Customer Focus

Also on Thursday, Dallas-based TXU also announced that beginning in 2005 it will report its unregulated businesses as two segments, TXU Power, the company’s electric generation business, and TXU Energy, which includes the company’s retail energy subsidiary and its wholesale energy marketing and supply subsidiary. The latter segment also divide its retail and wholesale marketing operations into three key functions — consumer markets, business markets and wholesale markets — in order to increase customer focus.

In an effort to improve customer service, TXU Energy also made some new management appointments. Jim Burke joined the company as senior vice president of consumer markets. He comes to TXU from Gexa Energy where he was president and COO. In addition, TXU Corp. announced that Scott Longhurst, senior vice president and controller resigned to accept an employment opportunity with a company in the United Kingdom. Stan Szlauderbach, assistant controller, will assume Longhurst’s responsibilities on an interim basis.

Kevin Bohn continues in his role as senior vice president of business markets, and Larry Leverett will assume the position of senior vice president of wholesale markets. Each of the division leaders will report to CEO Paul O’Malley.

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