TXU Corporation

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2001 Summary Annual Report backpage 1page 2next

This pie chart shows the percentage of customers by region for 2001: Europe, 52%; North America, 39%; Australia, 9%. This pie chart shows the percentage of assets by business segment for 2001: US Electric, 45%; Europe, 36%; US Gas, 7%; Australia, 7%; US Energy, 5%.
This pie chart shows the percentage of revenues by segment for 2001: Europe, 46%; US Electric, 27%; US Energy, 20%; US Gas, 4%; Australia, 3%. This pie chart shows capitalization ratios for 2001: Long-term debt, 59.3%; common stock, 30.6%; equity-linked securities, 5.4% (classified as long-term debt); preferred stock, 4.7%.


SEGMENT RESULTS
US ELECTRIC. The US Electric segment’s operating revenues increased $147 million, or 2 percent, to $7.6 billion in 2001. This increase was primarily due to lower regulatory earnings cap adjustments that benefited revenues. Energy sales in gigawatt-hours declined 1 percent due to milder weather and a slower-growing economy, partially offset by the effect of 2 percent growth in the number of customers.

Gross margin increased by $213 million, or 5 percent, to $4.6 billion in 2001, primarily due to the revenue increases discussed above.

Income before the extraordinary charges discussed above decreased by $12 million, or 1 percent, to $871 million in 2001. Results in 2001 included a $27 million ($18 million after-tax) write-off of a regulatory asset, pursuant to a regulatory order. Results in 2000 included a $44 million ($28 million after-tax) favorable adjustment related to the 1999 mitigation calculation and a $28 million ($18 million after-tax) gain on an asset sale.

Results in 2001 also reflected increases in generation maintenance, bad debts, and transmission costs as well as higher state and local gross receipts taxes and regulatory assessments.

The increase in bad debts and gross receipts taxes was primarily due to the rise in fuel costs and related revenue in late 2000 and early 2001. These items were partially offset by higher interest income on under-recovered fuel costs.

In December 2001, we announced an agreement to sell our Handley and Mountain Creek electric generating plants for $443 million in cash. Both plants are located in Texas and have a combined total plant capacity of 2,334 MW.

US GAS. The US Gas segment’s operating revenues increased $122 million, or 11 percent, to $1.2 billion in 2001. This increase reflected higher gas distribution prices (from higher natural gas costs and revenue enhancement activities) and volumes, primarily as a result of the colder winter weather in the first quarter of 2001. This revenue increase was partially offset by a $54 million effect of the absence of revenues from the gas processing business sold in May 2000.

Gross margin declined $38 million, or 8 percent, to $465 million, primarily due to the effect of the gas processing business sold in 2000. The lower gross margin also reflected certain gas cost adjustments that are unrecoverable under regulatory mechanisms.

The US Gas segment had a net loss of $16 million in 2001 compared to net income of $49 million in 2000. Results in 2000 included a $53 million ($34 million after-tax) gain on the sale of the gas processing business. The weaker results in 2001 also reflected the decrease in gross margin discussed above and higher operating expenses, primarily gross receipts taxes, bad debts, and maintenance costs to improve system reliability. The increase in gross receipts taxes and bad debts was primarily due to the rise in natural gas costs and related revenue in late 2000 and early 2001. These increases were partially offset by a favorable settlement of a gas purchase contract and lower net interest expense.

US ENERGY. The US Energy segment’s operating revenues increased $74 million, or 1 percent, to $5.6 billion in 2001. This growth reflected unrealized mark-to-market valuations of wholesale trading positions and certain retail contracts and higher wholesale power (electricity) sales. Physical wholesale power volumes sold grew 19 percent during 2001. This growth was partially offset by lower natural gas sales. Physical gas volumes sold declined 30 percent, although average gas sales prices rose 37 percent.

Gross margin increased $309 million to $387 million in 2001. The growth reflected increased power trading activities in the Electric Reliability Council of Texas (ERCOT) region in anticipation of competitive activity in Texas, as well as increased trading in markets outside of ERCOT. Revenues and gross margin in 2001 were impacted favorably by a $219 million net effect of mark-to-market valuations of wholesale trading positions. In addition, during 2001 the retail energy services business began entering into contracts with large commercial and industrial customers for electricity deliveries in Texas, and $88 million in net origination gains was recorded upon inception of these contracts.

The US Energy segment had net income of $6 million in 2001 compared to a net loss of $88 million in 2000. The improved results reflected the higher out-of-ERCOT trading margins, optimization of the forward ERCOT positions, and retail energy services margins. These benefits were partially offset by higher spending for staffing and computer systems to support expanded trading and retail operations, largely in anticipation of competitive activity in the Texas electricity market on January 1, 2002.
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