Financial Flexibility
Another goal is to significantly strengthen TXU's financial flexibility, which means the ability to withstand downside market swings and capitalize on newly emerging opportunities. Compared with 2003, we made progress last year against three important measures of credit quality. Interest coverage, as measured by the ratio of EBITDA to interest expense, improved by one-third. Following the success of our 2004 liability and capital management program, interest coverage is expected to continue to improve in 2005. This is a significant change relative to 2003, when TXU's EBITDA-to-interest ratio ranked near the bottom of the industry. Debt to EBITDA also improved by nearly 20% in 2004, and we expect ongoing improvement in this key metric. At the end of 2004, available liquidity (cash and credit-facility capacity) stood at $2.8 billion and is projected to remain above a $1.5 billion threshold throughout 2005.

TXU's Enduring Legacy
While we had a good turnaround year, we're building TXU to last over the long haul because what we do is important. We like knowing that our service keeps a child's nightlight burning to chase away the darkness and the super store open around the clock. We're happy to cool the malls and heat the high rises. Building on TXU's 100-year history, our goal is to develop a company with the muscle and mindset to achieve strong productivity and earnings through any economic cycle, technology change or commodity price swing. High-performance industrial companies are on relentless self-improvement programs. While the customer always rules, these companies aren't content with anything except top-quartile earning power and shareholder returns. They never cease to strive for higher efficiency, leaner production and lower costs, and they employ technology to their advantage. They earn the right to grow first; then they seize growth opportunities with high returns and prompt payback. Their work culture is disciplined, with people who have a passion for winning, an enthusiasm for surpassing aggressive targets and an intensity for constant improvement. Their financial strategies are tested against downside cases, and they operate with plenty of liquidity, properly structured debt and an abundance of capital strength. They're good stewards of the environment, caretakers of their communities and aboveboard in their business practices. The leading companies keep it simple - simple organization, simple profit plans, clear objectives, real accountability and an understandable business model. This is the kind of company TXU aspires to be.