TXU predicts 20% rise in 2002 first quarter net income

By the OGJ Online Staff

HOUSTON, Jan. 31, 2002 — Energy producer and marketer TXU Corp. Thursday reported a 2001 fourth quarter loss of $76 million or 26-/share, including $274 million in various charges.

The Dallas-based company said it expected 2002 first quarter earnings to be more than 20% higher than the first quarter 2001, representing a range of $1-$1.05/share. TXU said it also expected to meet earnings expectations of $4.35-$4.45/share stock in 2002 with continued 9-11% growth thereafter.

Mike McNally, chief financial officer said the debt reduction program will continue as “we pay down debt with proceeds from securitization bond sales and strong free cash flow to better position ourselves for continued growth and improved returns on capital.”

TXU shares were up 1.28% to $48.10 in early trading on the New York Stock Exchange.

TXU’s merchant energy business should produce 11-13% earnings growth McNally said, the company as expands outside its traditional market in Texas, and continue its expansion in Europe and Australia. McNally predicted North Texas regulated operations will contribute 25% of earnings in 2002.

Fourth quarter 2001 charges included $154 million for restructuring to prepare for deregulation in the Texas market and $22 million to write off assets associated with the collapse of Enron Corp., now under bankruptcy court protection. Excluding the charges, TXU reported fourth quarter net income of $198 million or 75-/share, compared to net income of $156 million or 61-/share in the year earlier period.

For the year, TXU reported net income of $665 million or $2.52/share, including special charges, compared to net income of $904 million or $3.43/share in 2000. The company said it experienced continued strong operating performance in the US, growth in Europe, and better than expected results in Australia.

“TXU had an outstanding transition year in 2001,” said CEO Erle Nye. The US electric operations provided an additional $52 million of contribution after tax in 2001, compared to 2000 as a result of increased rate base and decreased interest costs.

The contribution from US gas operations declined by $31 million after tax from prior year results. TXU blamed decreased margins, increased costs to improve reliability, and uncollectible receivables associated with the high natural gas prices and cold weather during the 2000/2001 winter.

The US energy segment provided a much better than expected additional $67 million of after tax contribution from operations over 2000, TXU said. Significantly improved trading and retail margins more than offset the expected increase in organizational expenditures, it said.

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