Goldman Sachs 2004 Annual Report Download - page 11

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texas฀genco—
Using the capital markets to
grow in the energy markets.
I D E A S ฀
In฀early฀2004,฀four฀private฀equity฀firms฀formed฀an฀investor฀group฀฀
to฀acquire฀Texas฀Genco฀Holdings,฀Inc.,฀one฀of฀the฀largest฀whole-฀
sale฀electric฀power฀generation฀companies฀in฀the฀United฀States.฀฀
For฀The฀Blackstone฀Group,฀Hellman฀&฀Friedman,฀Kohlberg฀Kravis฀
Roberts฀&฀Co.฀and฀Texas฀Pacific฀Group,฀the฀key฀challenge฀to฀฀
completing฀the฀transaction฀was฀the฀inherent฀sensitivity฀of฀Texas฀
Genco’s฀earnings฀to฀volatile฀commodity฀prices฀in฀the฀gas-driven฀฀
Texas฀energy฀market.฀Goldman฀Sachs฀combined฀its฀merger฀฀
advisory,฀industry,฀financing฀and฀risk฀management฀expertise฀฀
to฀help฀the฀investor฀group฀leverage฀Texas฀Genco’s฀assets฀and฀฀
win฀the฀auction฀process฀in฀the฀largest฀leveraged฀buyout฀in฀the฀฀
power฀sector฀in฀recent฀history฀by฀creating฀an฀innovative฀financing฀฀
package฀that฀included฀a฀highly฀structured฀commodity฀hedge.
C A P I TA L ฀
Goldman฀Sachs฀underwrote฀over฀$3.6฀billion฀of฀capital฀for฀this฀฀
transaction฀in฀both฀the฀leveraged฀loan฀and฀high-yield฀markets.฀฀
Goldman฀Sachs’฀integrated฀approach฀to฀this฀transaction฀com-฀
bined฀our฀commodities฀expertise฀and฀industry฀knowledge,฀which฀฀
enabled฀the฀investor฀group฀to฀combine฀committed฀financing฀฀
with฀a฀commodity฀hedge฀in฀order฀to฀take฀advantage฀of฀the฀risk฀฀
profiles฀of฀both฀the฀commodities฀and฀financing฀markets.฀The฀฀
commodity฀hedge฀and฀Texas฀Genco’s฀forward฀sales฀program฀฀
resulted฀in฀strong฀cash฀flow฀generation฀and฀deleveraging฀which฀฀
facilitated฀a฀precedent-setting฀financing฀that฀achieved฀one฀of฀the฀
most฀attractive฀pricings฀in฀recent฀history฀for฀a฀leveraged฀buyout.
PEOPLE฀
Goldman฀Sachs’฀dedicated฀team฀approach฀and฀strong฀client฀฀
relationships฀were฀vital฀to฀this฀transaction.฀Team฀members฀from฀
three฀regions฀and฀several฀business฀disciplines฀—฀Investment฀฀
Banking,฀the฀Financing฀Group,฀Commodities฀and฀Credit฀฀
Products฀—฀worked฀closely฀with฀the฀investor฀group฀and฀a฀proven฀
management฀team฀led฀by฀Jack฀Fusco,฀CEO฀of฀Texas฀Genco,
to฀address฀multiple฀levels฀of฀complexity฀and฀decrease฀volatility.฀฀
Texas฀Genco฀demonstrates฀Goldman฀Sachs’฀ability฀to฀creatively฀฀
combine฀our฀merger฀advisory,฀industry,฀financing฀and฀risk฀฀
management฀expertise฀with฀our฀ability฀to฀act฀as฀a฀principal฀฀
in฀order฀to฀assist฀our฀clients฀with฀complex฀transactions.
GOLDMAN฀SAC H S ฀ 2 0 0 4 ฀ANNUAL฀ R E P O RT฀฀฀9
GOLDMAN฀SAC H S ฀ 2 0 0 4 ฀ANNUAL฀ R E P O RT฀฀฀9
GOLDMAN฀SAC H S ฀ 2 0 0 4 ฀ANNUAL฀ R E P O RT฀฀฀9