Houston Chronicle
08/24/06

NEW YORK -- Shares of Texas energy company TXU Corp. fell in Thursday midday trading, a day after a panel of judges recommended state regulators deny the company a permit to build the Oak Grove power plants.

On Wednesday, a panel of administrative law judges at the Texas Office of Administrative Hearings recommended the Commission on Environmental Quality deny TXU an air permit to build two steam builders burning lignite to generate electricity.

The panel said the company failed to prove it could control pollutants from the facility, which TXU hopes to complete by 2009.

Shares of TXU Corp. fell $1.94, or 3 percent, to $63.30 in midday trading on the New York Stock Exchange. The shares have traded in a range of $44.01 and $66.43 in the past year.

Merrill Lynch analyst Steve Fleishman said in a note to clients Thursday the recommendation is "clearly a setback", as current earnings estimates imply contributions from Oak Grove of about 85 cents per share in 2010.

If the Oak Grove project were eliminated entirely, the stock would lose about $5, Fleishman said.

Daniele M. Seitz, an analyst with Dahlman Rose, said the risk is the company may have to delay construction and run into contractual problems and cost overruns.

"It creates a little bit of a question mark, because everyone knows the only area the company cannot control is the time it takes to get the air permit, and whether they get the permit," she said. "Everybody is already counting on this massive growth margin coming to the company (from the new facilities), but everybody is also watching to make sure the program stays on budget and on time."

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