Less than a week after receiving shareholder approval (see NGI, Sept. 10), Dallas-based TXU Corp. said last Tuesday the Nuclear Regulatory Commission (NRC) has provided its approval related to the merger of the utility with Texas Energy Future Holdings LP. (TEF). While all of the regulatory approvals have been obtained, there is still some question by analysts as to whether the current credit crunch will allow such a debt-laden deal through the system.

TXU said with the NRC's approval now in hand, the merger is expected to close in the fourth quarter of 2007, subject to completion of customary closing conditions contained in the merger agreement.

TEF, which was formed for the transaction by a group of investors led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group, announced the deal in February, noting that if it was completed it would be the biggest leveraged buyout ever. The package includes substantial concessions to ratepayers and environmentalists. The $45 billion buyout (including $13 billion in debt) could mark a sea change in private equity's so far unsuccessful pursuit of utility assets. Also, it would herald the further "greening" of Wall Street and the energy patch in an era when global warming is on the minds of politicians, regulators, business leaders and consumers.

While TEF was able to secure bank financing in February ahead of the credit market trouble, those same banks might now attempt to impose higher interest rates. From the time of its announcement, the deal also attracted an abundance of controversy among utility regulators, Texas lawmakers, environmentalists and consumer groups, and spawned a number of political missteps by TXU management and deal backers, as well as lawmakers and regulators.

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