The competitive wholesale power market also functioned well in 2002, with power flowing reliably. We have over 19,000 megawatts of flexible, low-cost generation resources that are strategically positioned within the Texas power grid, with access to load-growth opportunities and transmission facilities.

We made strategic adjustments to our generation fleet mix in 2002. In Texas, we acquired a 260-megawatt combined-cycle plant, while completing the divestiture of 2,334 megawatts of gas-fired generation.




TXU Energy manages risk and creates value from these extensive retail and power production assets, capabilities, and customer relationships through its portfolio management capabilities. Portfolio

management at TXU is conservative, responsible, and anchored to physical assets and customer obligations.

Without a doubt, 2002 was a year of major transition and adjustment. The year began with high-growth expectations and opportunities offered by US deregulating energy markets. As the year progressed, the business environment underwent significant change with the reaction to scandal and failure within the energy industry. The pace of deregulation slowed, fewer participants remained in the trading markets, and access to cash in the capital markets tightened.

In response to slowing market conditions and intensifying credit constraints, TXU Energy took decisive action to re-scale and refocus on its core business and markets. We are well into a program to drive out $250 million from our cost structure and are committed to achieving year-on-year gains in productivity.

TXU Energy’s mission for 2003 is clear: protect and build on our strong Texas franchise and deliver on our earnings and cash flow targets.