TWO GREAT BUSINESSES TXU’s emergence as one of the world’s largest diversified energy companies has been driven by a clear vision of our industry’s future. From the foundation of 100 years of service as a Texas utility, we have reinvented ourselves to be successful in a new world of competition based on the conviction that liberalized markets better serve our customers and ultimately our shareholders. Today, the TXU team is helping 11 million customers on three continents — North America, Europe, and Australia — energize their lives through our two great businesses, competitive merchant energy and energy delivery. We have focused on our established strategy and implemented it consistently through our distinctive business model. The result is a transformed company where our merchant energy business now produces more than 75 percent of earnings, up from 35 percent only two years ago. Another result is total stock return that has exceeded the S&P 500 over the last three-year period. Together, our two strong businesses deliver value for shareholders and power and energy that enhance people’s lives. The privilege of serving customers and shareholders brings with it responsibility. In all our business decisions, we seek to practice sustainability, which means balancing the environmental, economic, and social needs of today without sacrificing the interests of future generations. Sustainability at TXU is concrete and creative. StayWarm, a unique fixed-payment service for energy, helps pensioners gain peace of mind and warm homes. Energy in the Community stimulates economic regeneration in a former coal-mining village. Energy Aid/Project Hap’n gives customers in need a way to pay their bills. Contributions to the Power of America Fund provide educational assistance to the children of the victims of the September 11 attacks. These and many other TXU programs make a real difference in people’s lives and are viable business propositions. We also are leaders in promoting environmentally friendly renewable energy from wind, biomass, landfill gas operations, and hydropower. In many cases, our partnerships and long-term contracts make these projects reality. Renewables are just one part of an environmental program that consistently achieves an exceptional record for clean air and water. These and other sustainability achievements have brought TXU recent recognition from many diverse groups, such as Friends of the Earth, the American Wind Energy Association, and the Australian Minerals and Energy Environment Foundation. In 2001, for the second year in a row, TXU was named to the Dow Jones Sustainability World Index because of our economic, environmental, and social performance. Service to customers, value to investors, sustainable business practices, energized employees — these qualities are helping TXU fulfill its vision of becoming the most admired global energy services company.