Management discusses TXU Electric restructuring plan

DALLAS, Sept. 11, 20001 – TXU Electric, a wholly owned subsidiary of TXU, today discussed its restructuring and refinancing plan with analysts. As announced last week, the meeting with analysts was aired live and will be archived on the TXU web site at .

Mike McNally, chief financial officer who was accompanied by a panel of TXU executives, led the discussion. The meeting opened with a brief review of the corporate business model and strategy and competitive advantages and was followed by discussion of the proposed new corporate structure and the TXU Electric plan for debt restructure.

The review of the business included a description of TXU Electric’s low cost, high performance transmission and distribution (T&D) business and its world class merchant energy business (TXU Energy). The T&D business has advantages of a favorable market structure that separates retail (end use) customers from the regulated delivery business, a reasonable regulatory environment, a solid growth and diverse service territory and excellent operational performance.

Also described was how TXU Energy’s full portfolio merchant energy business model is differentiated from other merchant companies through its integration of production, trading and retail. McNally pointed out that TXU Energy has unique competitive advantages that include a favorable market structure for competition in Texas and a strong starting position.

After the brief review of the unbundled businesses, McNally introduced the corporate structure that was proposed in the amendment to the TXU Electric business separation plan filed with the Public Utility Commission of Texas on August 30, 2001. The business separation plan is required by the electric industry restructuring law passed in the 1999 Texas Legislature. Simply stated, the law requires that TXU Electric’s business be separated into a power generation company, a retail electric provider, and a transmission and distribution utility by January 1, 2002. As announced on August 30, 2001 and consistent with the provisions of the law, the new corporate structure adds an intermediate holding company, referred to as “US Operations” in the meeting, that will separately hold the transmission and distribution utility and TXU Energy and its US merchant energy subsidiaries. The TXU International and TXU Gas companies will continue to be separate subsidiaries of TXU.

The discussion then moved to the debt-restructuring plan. The T&D business, which has indicative credit ratings of A3 from Moody’s Investors Service and BBB+ from Standard & Poors, will assume TXU Electric’s first mortgage bonds and related mortgage. “US Operations” will remain obligated on the first mortgage bonds, which will be secured by a lien on T&D assets. Certain TXU Electric first mortgage bonds and the Capital I (NYSE: TUEprM – news) and III (NYSE: TUEprO – news) Preferred Securities will be redeemed by year-end.

The plan calls for TXU Electric’s outstanding preferred stock to remain at “US Operations”. TXU Electric plans to initiate a simultaneous taxable tender program for the TXU Electric Debentures and TXU Electric Capital IV and V Preferred Securities in the week of September 17, 2001. These tender offers may be combined with consent solicitations, if market conditions warrant. Due to the indenture terms, if consents are not obtained, any Debentures and Preferred Securities not tendered will be assumed by the generation company subsidiary of TXU Energy. Details of the tender program are provided in the table below. This tender program and the redemptions mentioned above will be funded through capital markets transactions, bank debt or other borrowings.

Under the restructure plan, TXU Electric’s tax-exempt bond obligations will be assigned to TXU Energy, which has an indicative credit rating of BBB+ from Standard & Poors. During the week of September 17, 2001, TXU Electric plans to launch a modified Dutch auction tender program for 12 series aggregating $682 million of the pollution control revenue bonds issued by the Brazos and Sabine River Authorities.

The series are detailed in the table below. Program settlement will be funded by new tax-exempt bonds issued by the Brazos and Sabine River Authorities. The balance of the tax-exempt portfolio will be refinanced by year-end.

McNally estimated that the debt restructuring process will result in one- time charges to TXU earnings of between $70 million and $100 million (after- tax) in the fourth quarter ended December 31, 2001.

TXU is a global leader in electric and natural gas services, energy delivery, merchant trading, energy marketing, telecommunications, and other energy-related services.

TXU is one of the largest energy companies in the world with more than $27 billion of annual revenue and $43 billion of assets. TXU is one of the largest generators of electricity in the world and sells 300 million megawatt hours of electricity and 2.7 trillion cubic feet of natural gas annually. TXU delivers or sells energy to 11 million customers primarily in the US, Europe and Australia. Visit for more information on TXU.


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