Energy Future (TXU) 8-K Morgan Stanley Global Electricity

Morgan Stanley Global Electricity

& Energy Conference

C. John Wilder

Chairman and CEO

March 15, 2006

Exhibit 99.1

1

Safe Harbor Statement

This

presentation

contains

forward-looking

statements,

which

are

subject

to

various

risks

and

uncertainties.

Discussion

of

risks

and

uncertainties

that

could

cause

actual

results

to

differ

materially

from

management's

current

projections,

forecasts,

estimates

and

expectations

is

contained

in

the

company's

SEC

filings.

In

addition

to

the

risks

and

uncertainties

set

forth

in

the

company's

SEC

filings,

the

forward-looking

statements

in

this

presentation

could

be

affected

by

actions

of

rating

agencies,

delays

in

implementing

any

future

price-to-beat

fuel

factor

adjustments,

the

ability

of

the

company

to

attract

and

retain

profitable

customers,

changes

in

demand

for

electricity,

the

impact

of

weather,

changes

in

wholesale

electricity

prices

or

energy

commodity

prices,

the

ability

of

the

company

to

implement

the

initiatives

that

are

part

of

its

performance

improvement

program

and

growth

strategy,

and

the

terms

under

which

the

company

executes

those

initiatives,

and

the

decisions

made

and

actions

taken

as

a

result

of

the

company’s

financial

and

growth

strategies.

Regulation G

This

presentation

includes

certain

non-GAAP

financial

measures.

A

reconciliation

of

these

measures

to

the

most

directly

comparable

GAAP

measures

is

included

in

the

appendix

of

the

printed

version

of

the

slides

and

the

version

included

on

the

company’s

website

at

www.txucorp.com

under

Investor

Resources/Presentations.

2

TXU Investment Thesis

Financial

Performance

Financial outlook

Long-term sources and uses of cash

Future earnings growth potential

TXU Today

Core advantaged businesses

Business objectives

Texas Retail

Market

Benefits of competition

TXU retail strategy

TXU retail value proposition

Key Risks

Gas price and heat rate exposure

Impact of churn

New Build

Strategy

New build development options

TXU structural advantages

Build economics and market impacts

3

TXU’s Core Businesses Are Structurally Advantaged

Across The Entire Value Chain

TXU Power

Generation

2

nd

largest U.S.

deregulated

output

Access to low

cost lignite

reserves

63 TWh

of

baseload

production in a

gas on the margin

market

TXU Electric Delivery

Transmission

and Distribution

6

th

largest U.S. T&D

company

Top quartile costs

and reliability

High growth NERC

region (2.0%)

Efficient capital

recovery

No commodity

exposure

No retail customers

TXU Energy

Retail

Large scale

competitive

retailer

Loyal customer

base

Strong brand

recognition

Superior service

Wholesale

TXU Wholesale

Access to largest

ERCOT

generation fleet

Access to largest

ERCOT retail

position

Incumbent

expertise in

regulatory

advocacy and

market design

TXU Competitive Business

TXU Regulated Business

4

Our Long Term Objectives

1.

Drive 3-5% annual improvement in reliability, efficiency, and service

through our power, electric delivery, and retail operations

2.

Grow the Texas baseload

power generation portfolio organically by 25-

50% through the development of clean coal power plants

3.

Maintain our residential market share throughout Texas by profitably

gaining customers outside of North Texas and providing innovative

products and services to customers state-wide

4.

Leverage superior baseload

operations, construction expertise, and

structuring skills to build a high-quality solid-fuel generation business in

other competitive U.S. wholesale markets

5.

Continue to enhance our business through building strong management,

ensuring our financial risk profile is commensurate with our business

risk profile

5

TXU Investment Thesis

Financial

Performance

Financial outlook

Long-term sources and uses of cash

Future earnings growth potential

TXU Today

Texas Retail

Market

Benefits of competition

TXU retail strategy

TXU retail value proposition

Key Risks

Gas price and heat rate exposure

Impact of churn

New Build

Strategy

New build development options

TXU structural advantages

Build economics and market impacts

Core advantaged businesses

Business objectives

6

Competition Has Spurred Massive Generation Investment

Leading To A Significant Increase In Market Efficiency…

…Led to a more efficient

market with lower heat rates…

99-05; MMBtu/MWh

The efficiency improvement would be similar to

improving average automobile gas mileage from 20 mpg to 35 mpg

1

Based on 07 natural gas price of $9.48/MMBtu (NYMEX forward curve as of 3/13/06)

26

6

90-97

98-04

333%

ERCOT capacity additions…

90-04; GW

8.2

14.2

99

05

42%

78

135

99

05

…And lower wholesale

prices¹

99-05; $/MWh

42%

7

Net incumbent switch rates

Jan 06; Percent of load

74

75

30

7

19

Net residential incumbent switch rates

Sep 05-Jan 06; Percent of load¹

30

7

9

3

3

0.4

0.03

TX

MA

NY

DC

PA

CT

MD

OH

CA

NJ

3

2

1

1

Texas data as of 1/31/06 per ERCOT; NJ as of 12/31/05 from NJ Board of Public Utilities; PA as of 10/1/05 from Nov/Dec 05 KEMA Retail Energy Foresight Report ;

data for other states from Jan/Feb 06 KEMA Retail Energy Foresight Report and ranges from 9/30/05-1/1/06. Ohio excludes load attributable to municipal

aggregation.

Source:  KEMA, FCC, CERA, NJ Board of Public Utilities, Ohio PUC, ERCOT, Texas PUC 2003 Scope of Competition Data Responses

ERCOT retail switching

LCI

SMB

Residential

TX Local

phone after 4

years

Long

distance

after 4 years

…And To Significant Switching, Making Texas The Only

Functioning Competitive Retail Market

4.3X local phone

1.6X long distance

“I know of no

society that has

been marked by a

large measure of

political freedom,

and that has not

also used

something

comparable to a

free market to

organize the bulk

of economic

activity.“

Milton Friedman

10X the nine state

average

8

The Texas PUC Concluded That Deregulation Has

Delivered Significant Consumer Savings

107

88

North Texas average electricity prices

1

02-05; $/MWh

1

All

prices

are

average

yearly

prices

for

residential

customers

using

1,000

kWh

per

month

Sources:

PUCT

Legislative

Report

dated

February

3,

2006;

CERA

Special

Report:

“Beyond

the

Crossroads”

2005

The

PUC

found

that

an

average

residential

customer

could

have

saved

$800

in

the

Dallas

area

and

$1,450

in

the

Houston

area

More

than

80%

of

Texas

households

support

electric

competition

CERA

found,

across

the

U.S.,

residential

electric

customers

saved

approximately

$34

billion

as

a

result

of

deregulation

Estimated

regulated

price

Best

competitive

price

91

125

South Texas average electricity prices

1

02-05; $/MWh

Estimated

regulated

price

Best

competitive

price

18%

27%

9

To become the

leader in

competitive retail

electricity

Continue to provide

innovation and

superior service

in core market

Aggressively enter

new markets in

ERCOT

Opportunistically

enter Ex-ERCOT retail

markets

1

3

2

TXU Is Executing A Robust Retail Strategy In This Unique

Competitive Market

Objective:

Strategies:

Volatile commodity

markets

Lower brand

recognition

Higher margins ex

North Texas

Lower cost structure

No true competitive

retail markets outside

of ERCOT

Head start in retail

electric marketing

experience

Need for innovation

Competitor behavior

Challenges

Strong customer

experience

Superior service

Advantages

10

TXU Is Advantaged Relative To Competitors Along A

Number Of Critical Value Dimensions

0

20

40

60

80

100

Competitive

rates

Innovation

Customer

service

Brand

1

Percentage of customers stating agreement (strongly and somewhat) for TXU and other major competitor.  Attacker retailer information is

management estimate

Low cost

to serve

TXU

Other Major

Incumbent

Attackers

1

2

3

4

5

Customer value¹

06; Percent

Value dimensions

TXU is focused on establishing superior performance

against the key value dimensions

11

145

150

164

176

191

16

18

23

34

40

# 1: North Texas Has A More Competitive Rate Structure

Than Other Parts Of Texas

1

Based

on

average

customer

usage

of

12,000

kWh/yr.

with

PUC-approved

residential

load

profile;

net

margin

defined

as

un-discounted

PTB

rate

–

cost

of

energy

(avg.

NYMEX

12

mo.

Strip(3/13/06)

x

7.8

heat

rate

x

assumed

27.5%

adders–

avg.

wires

cost

-

SG&A

of

$6.50/MWh,

bad

debt

of

1.3%,

Other

taxes

of

1.75%

and

hedging/credit

costs

of

$2.00/MWh

2

Includes

full

implementation

of

most

recent

PTB

agreement

Incumbent economics by territory¹

March 06; $/MWh

Incumbent net

margin (%)

Average attacker

discount (%)

TXU has one of the lowest incumbent prices in Texas, the lowest incumbent

net margins, and the tightest competitive economics

11

12

14

19

21

4

6

9

15

14

Price

Net

margin

TNMP

Price

Net

margin

TXU

Price

Net

margin

CNP²

Price

Net

margin

CPL²

Price

Net

margin

WTU²

Total market

(Thousands of

customers)

180

2,570

1,720

630

150

12

Choice of

flexible price

and term

options

# 2:  TXU Is Taking The Lead In Developing Innovative

Product Solutions For Key Customer Needs

Customer

need

Product

examples

Customer

preferences

Price protection

Maximize

savings

No contracts

Reduce high

seasonal bills

Control over

how and when

to use energy

Energy

efficiency

Conservation

Guard

against

disruptions

Maintain

comfort

“Always-on”

electricity

Specialized

customer

service

Loyalty benefits

Service bundles

“Green”

energy

Added value

beyond

electrons

Understand

and control

over energy

usage

Increased

customer

service

In-home Usage

Monitor

Time of Use

Pricing

Whole-House

Surge

Protection

Standby

generation

Rewards+

Differential

service

PTB

Fixed price

Market

Tracker+

Average

billing

13

# 3:  TXU Customers Are More Satisfied With Our Service

Model

42

37

Customers very satisfied

1

06; Percent of customers

51

41

Leadership in innovation

1

06; Percent of customers

55

42

Environmental responsibility

1

06; Percent of customers

While 75% of incumbents’

customers are satisfied with their provider, TXU

has been able to differentiate itself on service

Other

incumbent

TXU

Other

incumbent

TXU

Other

incumbent

TXU

1

Based on independent telephone survey of household energy decision makers (Feb 06)

14

0

20

40

60

80

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Customer loyalty

1

05; Percent

# 4:  TXU Has Established Strong Brand Loyalty In Its

Incumbent Territory

TXU Energy customers in North Texas

Other major incumbent (in incumbent

territory)

TXU’s goal is to establish a superior brand throughout Texas

1

Based on TXU marketing survey

15

# 5: TXU Will Take Advantage Of Its Low Cost Service

Model To Attract New Customers

Net margin advantage

06; Percent

Better credit/

bad debt

practices

Lower cost

to serve

Longer

average

customer life

Attacker net

margin

0.3-0.4

0.4-0.6

0.2-0.3

1.2-1.8

Net margin

improvement

$/MWh

0.45-0.60

0.60-0.90

0.30-0.45

1.80-2.70

0.3-0.5

0.45-0.75

Price

advantage

TXU’s advantaged cost structure will allow it to profitably

attack through all likely parts of the margin cycle

16

18

10

Going Forward, The Texas Market Presents A Unique

Opportunity For TXU To Compete…

North Texas

Other Texas

02-03

Markets open with

sufficient margins for

all players

04-05

Rapid gas price

increases compress

margins, especially

in North Texas

06-07

Margins expected to

return to adequate

levels for incumbents

and some attackers

Incumbent point of view

Attacker point of view

North Texas

Other Texas

Average net margins

02-07; Percent

North Texas

Other Texas

14

5

North Texas

Other Texas

North Texas

Other Texas

North Texas

Other Texas

Incumbent point of view

9

0

13

9

4

-7

9

4

Adequate margin range

17

28

30

Total residential volume

forecast at EEI

(TWh)

32

30

Total residential volume

forecast updated

(TWh)

~50

0

Net income change

($ millions)

0

06

4

10

Volume change

(TWh)

…And The Opportunity To Grow The Franchise Across

Texas Profitably

Residential retail volumes

1

06E-10E; Mixed measures

Residential

retail

investment

thresholds:

Non-contract customers –

100% of cash returned

within ~12 months

Contracted customers –

100% of cash returned

within 2/3 of contract period

1

Includes IT and OOT volumes

18

TXU Investment Thesis

Financial

Performance

Financial outlook

Long-term sources and uses of cash

Future earnings growth potential

TXU Today

Texas Retail

Market

Benefits of competition

TXU retail strategy

TXU retail value proposition

Key Risks

Gas price and heat rate exposure

Impact of churn

New Build

Strategy

New build development options

TXU structural advantages

Build economics and market impacts

Core advantaged businesses

Business objectives

19

To become the

leader In

clean coal

power

Utilize TXU’s

structurally

advantaged assets

for low cost/

quick entry

Expand

existing sites

through a

standardized

reference plant

Develop west Texas

“greenfield”

sites

1

3

2

TXU Is Exploring Multiple Strategies For Clean Coal Power

Expansion

Objective:

Strategies:

Limited “greenfield

sites”

have required

water and

transmission

Difficult to tailor to all

existing opportunities

Limited assets

Challenges

Potential cost and

time savings

Significant potential

cost and time savings

(learning curve)

Shared infrastructure

Expedited access to

existing equipment

and resources

Advantages

20

Strategy 1: Both Oak Grove And Sandow

5 Leverage

Multiple Structural Advantages…

1,170

865

PV of cash flows for a “greenfield”

coal plant

(1,155)

(1,235)

PV of capex

for a “green field”

coal plant

170

170

Compression of construction schedule

4

300

180

Reduced capital expense²

215

190

Operating edge³

1,100

510

TXU plant value

400

340

Access to low cost fuel¹

(370)

Sandow

5

15

Oak Grove

NPV of a “green field coal plant”

New build coal plant value: NPV

$/KW

TXU is uniquely positioned to drive significant value

creation with its announced new build program

1

Assumes Sandow

5 has an $6.20/MWh advantage, Oak Grove has an $6.50/MWh advantage

2

Assumes Sandow

5 has an $200/KW advantage, Oak Grove has an $450/KW advantage

3

Assumes TXU has a $10/KW-year O&M advantage and 5% capacity factor advantage

4

Assumes TXU reduces construction time by 12 months

21

…To Deliver Strong Returns Within The Next 5 Years

15

0

0

Delta net

income

85

70

15

Net income

(today)

06

70

10

70

09

15

08

07

Net income

(EEI)

Sandow

5 –

600 MW

06E-10E; $ millions

TXU is continuing to optimize both the construction time and cost to ensure

the plants are on line during the visible period of high prices

Oak Grove –

1,720 MW

06E-10E; $ millions

55

200

25

Delta net

income

340

230

25

Net income

(today)

06

285

10

30

09

08

07

Net income

(EEI)

PV/I = 1.5

35% of cash returned in first

5 years (through 2010)

PV/I = 2.2

45% of cash returned in first

5 years  (through 2010)

22

TXU Can Potentially Leverage Strategy 1 At Other Sites

TXU is examining the viability of expansion at a number of its current sites

It appears that these sites may have $200-$500/KW advantage over the

generic “greenfield”

site

Gas plant repowerings

Valley

Tradinghouse

Stryker Creek

Coal plant expansions

Martin Lake

Big Brown

Monticello

Examples

Existing land and

infrastructure ($150/Kw)

Access to water, rail and

transmission ($20-

$100/KW)

Low cost, secure fuel

supply(0-$200/KW)

Existing land, equipment

and infrastructure

($200/KW)

Access to water, rail and

transmission ($100/KW)

Advantages

23

Strategy 2:  Standardization And Scale Can Enable Step

Changes In Performance

9.2

11.3

14.4

36%

3.0

5.3

10.0

7.6

Platform costs

96-98; $ thousands / ton

A

96

B

97

C

98

E&C time

94-97; Years/ platform

44%

94

97

Better capability: Maximum

water depth

96-05; Thousands of feet

96

05

32%

Design of the reference plant could create a “learning curve”

advantage that could be leveraged on a much larger scale

Leading deep water gulf E&P company example

24

35

45

55

65

75

85

0

10

20

30

40

50

60

70

80

TXU Current Expansion Sites Are Advantaged Relative To

3

rd

Party Expansion Sites And Generic Greenfield Sites

Breakeven levelized

power price (10% WACC)

$/MWh

Incremental capacity

GWs

Within

environmental

air shed

•

TXU will continue to explore the ability to exploit its Strategy

1 sites

•

TXU is undertaking the R&D necessary for the reference plant strategy

TXU sites

3rd

party sites

Strategy 3

Economically

viable

Strategy 1

Strategy 2

25

0.0

0.2

0.4

0.6

0.8

SD

OH

MD

KY

DE

SC

IL

LA

VT

ME

TXU’s New Plants Will Be Among The Cleanest Coal

Plants In The US In One Of The US’

Cleanest States

Oak Grove and Sandow

5 will operate with the best available control

technology, reinforcing Texas’

proven environmental track record

Source: EPA Acid Rain database and EIA

~0.2

0.3

0.4

0.8

4.4

~0.1

0.1

0.1

0.3

1.1

Average emission rates

70-15; Lbs/MMBtu

SO

2

NO

X

US Avg

1970

US Avg

2004

Texas

2004

CAIR

2015

Oak Grove,

Sandow

5

SO

2

NO

X

SO

2

NO

X

SO

2

NO

X

SO

2

NO

X

Texas has the 6th

cleanest emissions rate

and the cleanest of all

states that use coal

National Average

Average emission rates

04; Lbs/MMBtu

26

0

25

50

75

100

125

150

0

10

20

30

40

50

60

70

80

90

The CCGT Build Has Provided A Large Buffer For

Significant New Coal Capacity

ERCOT generation portfolio: Average variable cost1

05-10; $/MWh

Approximately 1,800 MW a year is needed to keep up with demand growth

Natural gas is expected to stay on the margin in ERCOT for the foreseeable

future

Cumulative Capacity

GW

1

Based

on

gas

price

of

$8/MMBtu

2

Assumes

8,421

MW

capacity

brought

on

line

05 supply curve

10 supply curve²

05 peak

demand

10 peak

demand

Proposed new

build units

across Texas

27

TXU Investment Thesis

Financial

Performance

Financial outlook

Long-term sources and uses of cash

Future earnings growth potential

TXU Today

Texas Retail

Market

Benefits of competition

TXU retail strategy

TXU retail value proposition

Key Risks

Gas price and heat rate exposure

Impact of churn

New Build

Strategy

New build development options

TXU structural advantages

Build economics and market impacts

Core advantaged businesses

Business objectives

28

Exposure To Commodity And Heat Rate Movement In The

Near Term Is Minimal

~30

~5

~0

06E

07E

08E

EBITDA Impact Of $1/MMBtu

change in natural gas

06E-08E; $ millions

EBITDA Impact of 0.2 MMBtu/MWh

change in market heat rate¹

06E-08E; $ millions

Over the next three years, TXU has a small sensitivity

to natural gas price and heat rate changes

~60

~45

~25

06E

07E

08E

Change in

EBITDA

Percent

<1%

<1%

<1%

<1%

<1%

~1%

1

Based on NYMEX 06 natural gas price = $7.95 for remaining 9 months, 07 natural gas price = $9.48, 08 natural gas price = $9.09 as of 3/13/06

2

Includes

impact

of

incremental

volumes

(~1.5

TWh)

from

Sandow

5

and

Oak

Grove

2

2

29

While Falling Gas Prices Have Increased Sensitivity To

Churn, It Is Still Small Relative To Overall Earnings Power

07 NYMEX natural gas price

$/MMBtu

Even under a double churn scenario with low gas prices,

earnings are impacted only by $0.20 or 3%

Annual 06-07

customer churn

Percent

0

-8

-16

8.00

9.65

11.00

EEI

assumptions

Estimated EPS impact

1

07E; $/share and % change from 07 mean EPS

1

Assumes NYMEX 07 heat rate of 7.9 and adders of 27.5%

(0.20)

-3%

(0.01)

0%

0.18

3%

(0.11)

-2%

0.00

0%

0.12

2%

(0.04)

-1%

0.01

0%

0.06

1%

30

TXU Investment Thesis

Financial

Performance

Financial outlook

Long-term sources and uses of cash

Future earnings growth potential

TXU Today

Texas Retail

Market

Benefits of competition

TXU retail strategy

TXU retail value proposition

Key Risks

Gas price and heat rate exposure

Impact of churn

New Build

Strategy

New build development options

TXU structural advantages

Build economics and market impacts

Core advantaged businesses

Business objectives

31

Execution Of TXU’s Strategy Results In A Robust Forward

Plan For TXU…

Operating cash flow

2

03-06E; $ billions

Operational EPS

1

03-06E; $/share

Free cash flow

3

03-06E; $ billions

EBITDA/Interest

1

03-06E; Ratio

Debt

4

/EBITDA

1

03-06E; Percent

135%

610%

60%

293%

03

04

05

06E

1.9-

2.0

3.1

4.2

5.1

03

04

05

06E

7.0-

7.2

4.9

4.0

3.0

03

04

05

06E

205%

1.0

0.7

03

04

05

06E

03

04

05

06E

0.79

1.41

3.33

5.50-

5.75

1.5

2.0

2.9

4.5-

4.7

1

Results

are

from

continuing

operations

excluding

special

items

and

are

split

adjusted.

2

03

normalized

operating

cash

flow

(OCF)

($2.4B)

excluding

cash

tax

refund

($0.6B)

and

02

collections;

04

normalized

OCF

($1.8B)

excluding

special

items

(-$0.3B);

05

normalized

OCF

excludes

an

estimated

$109

million

of

special

items.

3

Normalized

free

cash

flow

is

defined

as

normalized

operating

cash

flow

less

capital

expenditures

and

nuclear

fuel.

4

Debt

excludes

transition

bonds.

EBITDA

1

03-06E; $ billions

145%

03

04

05

06E

2.3

2.7

3.9

5.5 -

5.7

1.8

2.6-

2.9

32

…And Generates A Significant Amount of Free Cash Flow

Over The Next 5 Years…

Even after building Oak Grove and Sandow

5, TXU will generate over $7 billion of

discretionary FCF to grow the business or return to shareholders

20.0

2.0

06E-10E

21 -

23

Core portfolio

capex

Cash for investment/

distribution

OCF

Sources of cash

06E-10E (indicative); $ billions

6.5

2.3

4.0

2.0

7.2

06E-10E

Uses of cash

06E-10E (indicative); $ billions

New clean coal capex

Dividends

Corp/Energy LLC debt

Electric

Delivery debt

21 -

23

33

…Enabling A Strategy That Will Deliver Solid Long-Term

Earnings Growth

6.95 –

7.20

10E operational EPS

5.5% -

6.0%

06E-10E annual growth rate (percent CAGR)

+/-

0.60

EPS change with +/-$1/MMBtu in 2010 natural gas¹

0.60

Performance improvements

5.50-5.75

06E operational EPS

0.80

Debt repurchases and share repurchases

1.45

New build, retail market penetration, T&D system growth

3.5% -

8.0%

(1.40)

06E-10E

06E-10E growth rate with +/-

$1/MMBtu in 2010 natural gas (%)

06E-10E commodity impacts and retail churn¹

Performance Driver

Recent commodity price moves have increased the 5-year growth rate; at the same

time, TXU has further reduced its 1-5 year natural gas price exposure.

TXU Estimated Long-Term Growth

06E-10E; $ per share, percent

1

Based on forward natural gas prices as of March 13, 2006

34

TXU: Turnaround Complete, Creating Value In The Future

1.

Building a sustainable business that will be competitive over the

long term

–

Driving 3-5% in annual productivity improvements

–

Designing innovative products and service to meet customer

needs

2.

Executing an organic growth strategy that could expand TXU’s

baseload

portfolio by 25-50%

–

Leveraging structurally advantaged sites to grow net income by

over $400 million by 2010

–

Creating a standard plant design and riding down the learning

curve to potentially scale up the new build program

3.

Delivering consistently strong financial performance

–

Industry leading free cash flow of ~$3 billion per year after

dividends

–

5-year compounded annual EPS growth of approximately 6%

–

Industry leading financial flexibility with over 7X interest coverage

Appendix –

Regulation G Reconciliations

36

Financial Definitions

Total

debt

less

transition

bonds

and

debt-related

restricted

cash.

Transition,

or

securitization,

bonds

are

serviced

by

a

regulatory

transition

charge

on

wires

rates

and

are

therefore

excluded

from

debt

in

credit

reviews.

Debt-related

restricted

cash

is

treated

as

net

debt

in

credit

reviews. 

TXU

uses

this

measure

to

evaluate

its

debt

and

capitalization

levels.

Debt (non-GAAP)

Total

debt

less

transition

bonds

and

debt-related

restricted

cash

divided

by

EBITDA.

Debt/EBITDA

is

a

measure

used

by

TXU

to

access

credit

quality.

Debt/EBITDA (non-GAAP)

Operating

revenues

(GAAP)

less

fuel

and

purchased

power

costs

and

delivery

fees

(GAAP).

Contribution Margin

Cash

provided

by

operating

activities

adjusted

for

unusual

or

nonrecurring

items.

Used

by

TXU 

predominantly

as

a

forecasting

tool

to

estimate

cash

available

for

capital

expenditures,

nuclear

fuel,

dividends,

debt

reduction

and

other

investments.

Normalized Operating Cash

Flow

(non-GAAP)

Cash

provided

by

operating

activities,

adjusted

for

unusual

or

nonrecurring

items,

less

capital

expenditures

and

nuclear

fuel.

Used

by

TXU

predominantly

as

a

forecasting

tool

to

estimate

cash

available

for

dividends,

debt

reduction,

and

other

investments.

Normalized Free Cash Flow

(non-GAAP)

EBITDA

divided

by

cash

interest

expense

is

a

measure

used

by

TXU

to

assess

credit

quality.

EBITDA/Interest (non-GAAP)

Income

from

continuing

operations

before

interest

income,

interest

expense

and

related

charges,

and

income

tax

plus

depreciation

and

amortization

and

special

items.

EBITDA

is

a

measure

used

by

TXU

to

assess

performance.

EBITDA (non-GAAP)

Interest

expense

and

related

charges

less

amortization

of

discount

and

reacquired

debt

expense

plus

capitalized

interest.

Cash

interest

expense

is

a

measure

used

by

TXU

to

assess

credit

quality.

Cash Interest Expense

(non-GAAP)

Capital expenditures.

Cap ex

Definition

Measure

37

Financial Definitions –

cont.

Per

share

(diluted)

income

from

continuing

operations

net

of

preference

stock

dividends,

excluding

special

items,

the

adjustment

in

2005

for

the

cost

of

the

true-up

payment

on

the

52.5

million

share

accelerated

common

stock

repurchase

(ASR)

and

the

adjustment

in

2004

for

the

dilution

effect

of

the

convertible

senior

notes,

the

majority

of

which

were

repurchased

in

the

fourth

quarter

of

2004.

TXU

relies

on

operational

earnings

for

evaluation

of

performance

and

believes

that

analysis

of

the

business

by

external

users

is

enhanced

by

visibility

to

both

reported

GAAP

earnings

and

operational

earnings.

Operational Earnings per

Share (non-GAAP)

Income

from

continuing

operations

net

of

preference

stock

dividends,

excluding

special

items,

the

adjustment

in

2005

for

the

cost

of

the

true-up

payment

on

the

52.5

million

share

accelerated

common

stock

repurchase

and

the

adjustment

in

2004

for

the

dilution

effect

of

the

convertible

senior

notes,

the

majority

of

which

were

repurchased

in

the

fourth

quarter

of

2004.

TXU

relies

on

operational

earnings

for

evaluation

of

performance

and

believes

that

analysis

of

the

business

by

external

users

is

enhanced

by

visibility

to

both

reported

GAAP

earnings

and

operational

earnings.

Operational Earnings

(non-GAAP)

Long-term

debt

(including

current

portion),

plus

bank

loans

and

commercial

paper,

plus

long-

term

debt

held

by

subsidiary

trusts,

plus

preferred

securities

of

subsidiaries,

including

exchangeable

preferred

membership

interests

(EPMI).  

Total Debt (GAAP)

Unusual

charges

related

to

the

implementation

of

the

performance

improvement

program

and

other

charges,

credits

or

gains,

that

are

unusual

or

nonrecurring.

The

performance

improvement

program

was

implemented

in

phases,

and

the

majority

of

charges

associated

with

the

program

occurred

in

2004.

Special

items

are

included

in

reported

GAAP

earnings,

but

are

excluded

from

operational

earnings.

Special

items

associated

with

the

performance

program

debt

extinguishment

losses

and

costs

related

to

severance

programs,

asset

impairments

and

facility

closures.

Special Items (non-GAAP)

Definition

Measure

38

Table 1: TXU Corp. Operational Earnings Reconciliation

Twelve Months Ended December 31, 2005, 2004 and 2003

$ millions and $ per share after tax

1.41

1.29

(0.04)

0.03

-

0.13

0.04

1.41

(0.02)

(0.03)

(0.63)

(0.64)

04

887

828

(22)

-

-

81

22

849

(10)

(16)

(378)

(386)

04

3.33

(0.31)

(0.02)

0.01

1.02

2.63

0.02

-

0.02

0.10

(0.01)

2.50

05

544

-

(22)

-

-

566

22

-

58

-

(74)

560

03

0.08

8

Cum. effect of change in accounting principles

-

-

Effect of share dilution/rounding

-

-

Effect of ASR true-up

-

50

Extraordinary (gain) loss

-

-

Buyback premium on EPMI

0.79

-

(0.03)

0.82

0.03

(0.10)

0.81

03

1,615

Operational earnings

(150)

Special items

(10)

Preference stock dividends

1,775

Income from continuing operations

10

Preference stock dividends

(5)

Discontinued operations

1,712

Net income (loss) available for common

05

39

Table 2: TXU Corp. Total Debt

Years Ended December 31, 2005, 2004 and 2003

$ millions

546

-

-

Long-term debt held by subsidiary trusts

12,889

38

12,412

229

-

210

04

-

358

Commercial paper

10,608

11,332

All other long-term debt, less due currently

-

440

Notes payable

759

-

Preferred securities of subs 

12,591

678

03

13,380

Total debt

1,250

Long-term debt due currently

Debt

05

40

Table 3: TXU Corp. Interest and Debt Coverage Ratios

Twelve Months Ended December 31, 2005, 2004 and 2003

$ millions unless otherwise noted

7.3

3.6

4.2

4.0

11,631

-

(1,258)

12,889

680

12

(27)

695

2,740

1,190

1,550

760

(28)

695

42

81

(1,677)

1,758

04

252

632

Income tax expense

A

2,413

2,793

Cash provided by operating activities

B

(1,847)

(1,018)

Reconciling adjustments from cash flow statement

724

776

Depreciation and amortization

5.2

4.2

5.1

3.0

11,566

(525)

(500)

12,591

765

12

(31)

784

2,290

-

2,290

(36)

784

566

03

4.8

4.5

3.1

4.9

12,213

-

(1,167)

13,380

801

17

(18)

802

3,919

(18)

3,937

(48)

802

1,775

05

EBITDA/interest –

ratio (C/D)

Debt/EBITDA –

ratio (F/C)

Cash provided by operating activities + cash interest expense/cash interest expense–

ratio (A+D/D)

Total

debt/cash

flow

from

operating

activities

–

ratio

(E/A)

E

Total debt

Interest expense and related charges

F

Total debt less transition bonds and debt-related restricted cash

Debt-related restricted cash

EBITDA

Transition bonds

D

Cash interest expense

Capitalized interest

Amortization of discount and reacquired debt expense

C

EBITDA (excluding special items)

Special Items

Interest income

Interest expense and related charges

Income

from

continuing

operations

before

taxes

and

extraordinary

items

Ref

41

Table 4:  TXU Corp. Normalized Operating Cash Flow and Normalized Free

Cash Flow

Twelve Months Ended December 31, 2005, 2004 and 2003

$ millions, unless otherwise noted

710

1,043

1,798

Normalized free cash flow (FCF)

(57)

(1,047)

2,902

-

-

109

2,793

05

(44)

(721)

1,475

(337)

(601)

-

2,413

03

(87)

Nuclear fuel

(912)

Capital expenditures

2,042

Normalized operating cash flow

-

2002 collections in 2003

-

2003 tax refund

284

Special items

1,758

Reported cash provided by operating

activities

04