TXU has two solid businesses in one company. We have a “wires and pipes” utility business delivering electricity and natural gas in several regions. We are building a global competitive merchant energy business—made up of generation, energy trading and risk management, and customers—with exciting prospects for higher returns and higher growth. At TXU, we are creating a global energy powerhouse.

Over a century of progress, we built a reputation as one of the leading electric utilities in the United States. Until 1995, all of our earnings came from regulated operations in Texas. Since then, a strategy designed to take advantage of the high-growth opportunity of the competitive energy business has transformed TXU into one of the world’s largest energy companies. In 2002, more than half of our earnings will come from higher-growth, higher-return activities as we capitalize on competitive energy markets in our core operating areas of the US, Europe, and Australia.

We have built a strong energy portfolio of approximately 11 million electricity and natural gas customers, energy trading and risk management capabilities, 30,000 megawatts of generation, significant natural gas facilities, and energy-delivery networks on three continents. Our sound financial results in 2000 show that our strategy is on target and that our portfolio management and merchant energy business model is ideal for creating growth and earnings in competitive energy markets. We continue to make optimum use of our strong base of assets and are on track to deliver earnings growth in a percentage level of high single digits again in 2001.

While we have made progress toward building a premier global merchant energy business, we remain focused on improving shareholder value. Last year, total return to shareholders was 34 percent. Yet, despite the improvement, our valuation as compared to our peers remains at a discount. My primary goal during the coming year is to increase the intrinsic value of this company. I am convinced that accomplishment of the following initiatives will allow us to reach that goal.