Diversification of US assets outside Texas. We intend to remain a leading electricity generator and retailer in our strong Texas market, where growth in electricity demand is projected to be slightly above three percent in the next few years and economic growth continues to flourish. In fact, the Dallas-Fort Worth area, where we are based, added more jobs in 2000 than any other market in the US. While we are pleased with our position in Texas, which generates substantial cash flows and earnings, we also are looking to further diversify. An important part of our US growth plan is to increase our position in favorable US markets outside the state. In that connection, we are considering selling or swapping some of our Texas generation assets as one way to enter new markets.
We have aggressively reorganized and expanded our energy trading and retail organizations to prepare for competition in 2002. Last year, we recruited nationally recognized leadership in energy trading and risk management to profitably develop the business. The US trading organization will have responsibility for commercial management of the US generation assets, dramatically expanding our energy trading position to become a major electricity marketer in North America. To build a unified energy portfolio, energy trading and the retail business must work seamlessly. In addition, the new retail organization is leveraging its strong core competencies for customer service under skilled personnel recruited from competitive industries.
Capturing the substantial value of global merchant energy. We are a better, stronger, smarter, and more competitive company with far brighter prospects because of our expansion in Europe and Australia. In 2000, these two regions combined contributed 30 percent of TXUs earnings. Their success is evidence of the value of our merchant energy business model. TXU Europes merchant energy business, with its 5.5 million United Kingdom retail customers, flexible generation portfolio, skills in energy trading and risk management, and growing continental presence, has a three-year underlying compound annual earnings growth rate of over 17 percent. We are applying these same portfolio management capabilities in Australia, where we have become a major energy player. The Australian portfolio now includes electricity and natural gas distribution and retailing, energy trading, gas storage and processing, and electricity generation.
Structural separation of our two businesses. We are in the process of structurally separating the energy-delivery business and the competitive energy business. The resulting organizational structure recognizes the different characteristics of the two businesses, including the level of regulation, types of skills required, and management philosophies needed. The separation will result in a concentrated focus on each business that will enhance the performance of each and increase our ability to be the best in each enterprise. The separation will be accomplished in each region consistent with the status of the regional regulatory environment and evolution toward competition.
Strengthening credit. We are very focused on strengthening the balance sheet. We intend to decrease our debt ratio to approximately 55 percent of total capitalization by the end of 2001. We will achieve this reduction through use of strong cash flows and continued divestiture of nonstrategic assets as we refine our energy portfolio. In 2000, proceeds from asset sales totaled $832 million. Formation of a joint venture for our telecommunications company raised more than $900 million, of which $600 million strengthened credit. Strengthening our balance sheet will better position us to take advantage of merchant energy growth opportunities through access to investment capital at the optimum cost.
Accomplishment of these key initiatives promises strong returns and a premium share position in the industry. Our strategy, the value of the portfolio we are building, our skill in extracting value from it, and our world-class leadership will continue to deliver solid growth and added shareholder value.
We have a distinguished past. Our future is even brighter. We have a remarkable employee team with high-caliber talent, energy, spirit, and focus to build a superior TXU.
I sincerely appreciate you and your continued confidence and support.
Erle Nye
Chairman of the Board and Chief Executive
