Cash flows continue to be among the strongest in the competitive energy industry. Cash provided by operating activities reached $2.3 billion in 2001. Coupled with asset sales already announced, these cash flows are more than adequate to fuel growth in existing operations, fund capital expenditures, reduce debt, and pay a dividend. TXU has built its position by implementing its integrated merchant energy business model to take advantage of the opportunities in open markets, while remaining committed to environmental excellence, customer service, and the health and safety of the public and employees. Our portfolio model is different in that it integrates energy production, merchant energy trading, and retail customers into one distinctive business. Active in all parts of the energy value chain, we purchase and produce fuel, generate electricity, trade electricity and natural gas, provide risk-management products, and sell energy and related services to retail and wholesale customers. Our approach allows us to manage the risks inherent in energy markets, providing flexibility and opportunities to anticipate and respond quickly to market changes and capture margins across the energy value chain. We believe the results demonstrate that this model delivers superior, sustainable growth. We also continue to believe in competition and the wisdom of the marketplace. The debacle in California and the highly publicized bankruptcy of Enron have caused some anxiety regarding deregulation, but neither of those events challenges the value of a competitive market. Competition better allocates resources, drives productivity, and stimulates innovation. It holds the promise of meaningful choice and new products and services for consumers. It offers adaptive energy companies like TXU opportunities to expand and grow. It provides investors with prospects for higher returns and greater shareholder value. And it powers more efficient and productive economies. Now is the time to move forward and stay the course to competition. In my letter to you last year, I articulated a number of long-term initiatives that are still key to reaching the goal of increasing the intrinsic value of TXU. The initiatives are to effectively implement industry restructuring in Texas, diversify US assets outside of Texas, capture the value of global merchant energy, structurally separate our two businesses, and strengthen credit. The 2001 results demonstrate consistent progress on these initiatives. TRANSITION TO COMPETITION COMPLETE The two-year transition to electricity competition in Texas effectively implemented the Texas Electric Choice Act in a way that benefited consumers and investors. The most successful industry restructuring model in the United States thus far, the Texas approach is the prototype for the new energy industry. It allows energy companies to retain generation facilities, provides for the use of contracts to manage the risk associated with volatile electricity prices, and separates retail customers from the regulated delivery business. Texas should see the benefits of continued growth in generation and transmission capacity. The Texas restructuring law also allows full implementation of TXU’s strategy and business model. Late in 2001, TXU filed a comprehensive regulatory settlement plan with the Public Utility Commission of Texas that, if approved, will resolve all major outstanding issues related to the company’s transition to competition. The settlement plan has the broad support of major customer groups as well as the PUCT staff. All parties benefit, including customers and shareholders. The settlement plan resolves a number of issues that could have resulted in years of litigation. It assures that shareholders receive fair treatment, as it allows recovery of regulatory assets through issuance of $1.3 billion of securitization bonds. It also fosters competition and creates certainty in the Texas electricity market for customers and all market participants. With the settlement accomplished, TXU can continue to focus on improving shareholder value, serving customers, and growing the business profitably. Now that the transition to competition in Texas is complete, we intend to build on our rich heritage and early successes. During the 2001 retail pilot project, which allowed some customers to switch retail electricity providers, we exceeded market-share goals in customer retention and acquisition. Priorities in 2002 include aggressively optimizing the portfolio management model in the Texas power market to enhance returns on capital, defending the existing customer base, and building strong retail entries into other markets in the state.