Texas Genco is a major power generation firm, active in the deregulated Texas electricity market and owns several major power plants in the Houston area that serve area power needs.
Seeking opportunities arising out of the deregulation of the electricity industry in Texas, in late 2004 four private equity firms—the Texas Pacific Group, the Blackstone Group, Kohlberg Kravis Roberts, and Hellman & Friedman of San Francisco—combined forces to purchase Texas Genco from the transmission & distribution provider utility Centerpoint Energy for Houston.
This coalition of firms acquired Texas Genco—which was the second largest operator of power generation facilities in the state—for a price of approximately $1.9 billion and using just $900 million in cash.
In late 2005, these private equity firms announced the sale of Texas Genco to NRG Energy of Princeton, N.J., for a price of roughly $5.9 billion. The investors achieved a gain of almost $5 billion over the space of an investment holding period of less than 18 months, a return that will mark one of the most lucrative private equity investments in recent years.