================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) - November 19, 2001
TXU Corp.
(Exact name of registrant as specified in its charter)
TEXAS 1-12833 75-2669310
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201-3411
(Address of principal executive offices, including zip code)
Registrant's telephone number, including Area Code - 214-812-4600
TXU Europe Limited
(Exact name of registrant as specified in its charter)
ENGLAND AND WALES 001-15709 98-0188080
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
The Adelphi, 1-11 John Adam Street, London, England WC2N 6HT
(Address of principal executive offices, including zip code)
Registrant's telephone number, including Area Code - 011-44-207-879-8081
================================================================================
This Form 8-K is filed separately by TXU Corp. (TXU), and its wholly-owned
subsidiary, TXU Europe Limited (TXU Europe). The information contained
herein with respect to TXU Europe, other than the pro forma financial
information filed by TXU Europe solely with respect to the business to be
disposed of, is filed by each of TXU and TXU Europe. TXU makes no
representation as to the information filed solely by TXU Europe.
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
TXU and TXU Europe
On November 19, 2001, TXU Europe announced that it has signed an agreement
to sell its UK distribution business (Eastern Electricity Limited), and its
50 percent interest in 24seven Utility Services Limited (24seven) to London
Electricity Group plc (LE Group) for (pound)1.310 billion (US$1.873
billion), consisting of a cash payment of (pound)560 million (US$801
million) and the assumption by LE Group of (pound)750 million (US$1.072
billion) aggregate principal amount of debt. TXU Europe expects that the
transaction will result in a one-time charge estimated to be up to
(pound)105 million (US$150 million) after taxes. TXU Europe's distribution
business is the largest in the UK and consists of the assets and wires that
deliver electricity through a 90,000 kilometer network in East Anglia and
southeast England. 24seven, a joint venture between TXU Europe and LE
Group, operates and maintains the networks for both TXU Europe and LE
Group. The transaction is expected to result in approximately (pound)1.310
billion (US$1.873 billion) of debt reduction, consisting of (pound)750
million (US$1.072 billion) of assumed debt and approximately (pound)560
million (US$800 million) of debt being repaid using the cash proceeds from
the sale. The actual amount of cash proceeds will depend upon the working
capital and fixed assets of Eastern Electricity Limited at the completion
date.
The transaction is expected to close in the first quarter of 2002. The
agreement is subject to customary closing conditions, including the
approval of the European Commission and the consent of holders of TXU
Europe Funding Limited's 7.00 percent Notes due 2005, which are secured by
TXU Eastern Funding Company's (TXUEFC) 35 Put 5 Notes due 2035. TXU Europe
expects to launch a consent offer to these holders and will offer a one
time fee of 0.5% of the aggregate principal amount of the Notes to holders
who grant a proxy to vote in favor of certain proposals allowing the sale.
After completion of the sale, holders of TXUEFC's 7.25 percent guaranteed
Notes due 2030 may have an option in some circumstances to put such Notes
to TXUEFC at par value. TXU Europe wishes to keep the full amount of the
Notes outstanding, and to this end is considering making an offer to
holders of the Notes to amend the terms of the Notes to limit the period of
time and manner in which the par put may be exercised. TXU Europe is
considering the addition of a par put in 2015 to the benefit of holders of
the Notes in exchange for their consent to the proposed amendments. The
launch of such an offer and its specific terms are subject to market
conditions.
The sale of Eastern Electricity Limited does not directly impact other debt
securities of TXU Europe.
In addition, in connection with the transaction, on November 19, 2001, TXU
Europe entered into a (pound)1.73 billion (US$2.47 billion) Facility
Agreement to refinance its previous (pound)1.075 billion (US$1.537 billion)
Facility Agreement, its (pound)300 million 364-day Revolving Credit
Facility and certain other debt instruments.
On November 19, 2001, TXU Europe also announced that it has agreed to sell
its 2,000 MW coal-fired West Burton power station to LE Group for
(pound)366 million (US$523 million) in cash. In addition, LE Group will
assume responsibility for the completion of the installation of a flue gas
desulphurisation plant at the site already underway and will reimburse TXU
Europe approximately (pound)60 million (US$86 million) for costs incurred
to date.
2
This report and other presentations made by TXU or TXU Europe contain
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Although TXU and TXU Europe
each believe that in making any such statement its expectations are based
on reasonable assumptions, any such statement involves uncertainties and is
qualified in its entirety by reference to factors contained in the
Forward-Looking Statements sections of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in TXU's and TXU
Europe's Annual Reports on Form 10-K for the year ended December 31, 2000
and of Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations in TXU's and TXU Europe's Quarterly Reports on
Form 10-Q for the quarterly period ended September 30, 2001, as well as
various regulatory issues; general industry trends; the ability to satisfy
the conditions to the transactions discussed herein; changes in business
strategy or development plans; changes in, or failure or inability to
comply with, governmental regulations, including, without limitation,
environmental regulations; financial market conditions including
unanticipated changes in interest rates, rates of inflation, or foreign
exchange rates; unanticipated changes in operating expenses and capital
expenditures; legal and administrative proceedings and settlements;
inability of the various counterparties to meet their obligations with
respect to financial instruments; changes in tax laws; among others, that
could cause the actual results of TXU or TXU Europe to differ materially
from those projected in such forward-looking statements.
Any forward-looking statement speaks only as of the date on which such
statement is made. Neither TXU nor TXU Europe undertakes any obligation to
update any forward-looking statement to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence
of unanticipated events. New factors emerge from time to time. It is not
possible for TXU or TXU Europe to predict all of such factors, nor can they
assess the impact of each such factor or the extent to which any factor, or
combination of factors, may cause results to differ materially from those
contained in any forward-looking statement.
3
TXU Europe
The following pro forma financial information is being filed solely by TXU
Europe for the purpose of providing information about its businesses after
giving effect to the transactions described below.
Index To Financial Information
Page
----
Pro Forma Financial Information
- -------------------------------
Unaudited Condensed Consolidated Pro Forma Financial Information of
TXU Europe Limited:
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of
September 30, 2001 ............................................. 6
Unaudited Condensed Consolidated Pro Forma Statement of
Income for the Year Ended December 31, 2000..................... 7
Unaudited Condensed Consolidated Pro Forma Statement of
Income for the Nine Months Ended September 30, 2001............. 8
Notes to Unaudited Condensed Consolidated Pro Forma
Financial Statements ........................................... 9
4
PRO FORMA FINANCIAL INFORMATION OF TXU EUROPE LIMITED
The following condensed consolidated pro forma financial statements of TXU
Europe have been prepared to give effect to the proposed sale of its
distribution business and its 50% interest in the 24seven joint venture
(together, the networks business), including the transfer of certain debt as
part of the disposition, and the use of proceeds from the sale to further reduce
outstanding debt.
The condensed consolidated pro forma financial statements have been derived from
and should be read in conjunction with TXU Europe's historical consolidated
financial statements contained in its annual report on Form 10-K for the fiscal
year ended December 31, 2000 and its quarterly report on Form 10-Q for the
quarter ended September 30, 2001. The Unaudited Condensed Consolidated Pro Forma
Balance Sheet as of September 30, 2001 gives effect to the disposition of the
networks business as if it had occurred on September 30, 2001. The Unaudited
Condensed Consolidated Pro Forma Statements of Income for the year ended
December 31, 2000 and the nine month period ended September 30, 2001 give effect
to the disposition of the networks business as if it had occurred on January 1
of each period presented. The pro forma financial information does not give
effect to other dispositions by TXU Europe subsequent to the respective periods
presented. The pro forma financial information is based on TXU Europe's
previously reported historical financial statements and adjusted for the
assumptions and estimates described in the accompanying Notes to the Unaudited
Condensed Consolidated Pro Forma Financial Statements. The assumptions and
estimates impacting the pro forma adjustments are based on the information
currently available to TXU Europe, and are subject to change. TXU Europe expects
that it will file additional pro forma information upon consummation of the
disposition of the networks business. This additional pro forma information will
be based upon information available to TXU Europe at the time such additional
pro forma information is prepared, including, but not limited to, the actual
cash proceeds of the disposition of the networks business and the application
thereof, and will present pro forma information for additional or different
periods from those presented herein. There can be no assurance that the
additional pro forma information filed by TXU Europe will not differ materially
from the information presented herein. The unaudited pro forma statements of
income are not necessarily indicative of the financial results that would have
been realized had the disposition of the networks business occurred on the
indicated dates, nor are they necessarily indicative of future financial
results. In addition, results for the nine-month period presented herein are not
necessarily indicative of results for a full year's operations.
The assets, liabilities, income and expenses included in the historical networks
business column relate to:
o operational assets and liabilities related to the ownership of the
distribution system. This includes the distribution system fixed assets,
working capital items and an allocation of purchase accounting adjustments,
including goodwill, recorded at the time of the TXU acquisition of the
former holding company of Eastern Electricity Limited in 1998;
o sterling-denominated bonds issued by Eastern Electricity Limited (the
Eastern Electricity Bonds) with an aggregate principal amount of(pound)750
million, together with unamortized debt issue costs and certain purchase
accounting adjustments. The book amount for these bonds is(pound)811
million, net of issue costs of(pound)5 million;
o TXU Europe's investment in the 24seven joint venture together with related
reserves in respect of restructuring costs; and
o income, costs and expenses related to the above, including interest on the
Eastern Electricity Bonds. These costs may differ from amounts previously
disclosed in the segment disclosures in TXU Europe's Form 10-K for the year
ended December 31, 2000 and its Form 10-Q for the quarter ended September
30, 2001, which included an allocation of cost of capital and other
corporate costs consistent with previous definitions and arrangements.
The unaudited pro forma adjustments in the income statements do not include the
effect of non-recurring charges related to the disposition of the networks
business.
5
TXU EUROPE LIMITED
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2001
((pound) MILLION)
TXU Less
Europe Networks Pro forma Consolidated
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ------------
ASSETS
Current Assets
Cash and cash equivalents ................................. 201 1 (a) 535 202
(a) (535)
Accounts receivable ....................................... 788 (87) (b) 70 771
Inventories - at average cost ............................. 133 -- -- 133
Merchant energy trading assets ............................ 608 -- -- 608
Prepayments and other current assets ...................... 247 (6) -- 241
------- ------- ------- -------
Total current assets .................................. 1,977 (92) 70 1,955
------- ------- ------- -------
Investments
Restricted cash ........................................... 711 -- -- 711
Other ..................................................... 434 (16) -- 418
------- ------- ------- -------
Total investments ..................................... 1,145 (16) 1,129
------- ------- ------- -------
Property, Plant and Equipment - Net ............................ 2,626 (1,304) -- 1,322
Goodwill ....................................................... 3,972 (254) -- 3,718
Merchant Energy Trading and Derivative Assets .................. 470 -- -- 470
Deferred Debits and Other Assets ............................... 495 (5) (c) (2) 488
------- ------- ------- -------
Total ............................................. 10,685 (1,671) 68 9,082
======= ======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Notes payable - banks and short-term loans on
accounts receivable ..................................... 336 -- (a) (535) 101
(a) 300
Long-term debt due currently .............................. 382 -- -- 382
Accounts payable .......................................... 878 (67) -- 811
Merchant energy trading liabilities ....................... 515 -- -- 515
Interest and taxes accrued ................................ 157 (32) 125
Other current liabilities ................................. 297 (13) (b) 70 415
(c) 61
------- ------- -------- -------
Total current liabilities ............................... 2,565 (112) (104) 2,349
------- ------- -------- -------
Accumulated Deferred Income Taxes .............................. 312 (189) -- 123
Provision for Unfavorable Contracts ............................ 514 -- -- 514
Merchant Energy Trading and Derivative Liabilities ............. 323 -- -- 323
Other Deferred Credits and Noncurrent Liabilities . ............ 219 (19) -- 200
Long-term Debt, Less Amounts due Currently ..................... 4,508 (816) (a) (300) 3,392
Preferred Securities of Subsidiary Perpetual Trust ............. 95 -- -- 95
Minority Interest .............................................. 313 -- (c) (9) 304
Shareholder's Equity ........................................... 1,836 -- (c) (54) 1,782
------- ------- -------- -------
Total ............................................. 10,685 (1,136) (467) 9,082
======= ======= ======== =======
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
6
TXU EUROPE LIMITED
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME FOR
THE YEAR ENDED
DECEMBER 31, 2000
((pound) MILLION)
Less
TXU Europe Networks Pro forma Consolidated
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ------------
Operating Revenues ....................................... 4,671 (371) (b) 217 4,517
------- ------- ------- ------
Operating Expenses
Energy purchased for resale and fuel consumed ....... 3,273 -- -- 3,273
Operation and maintenance ........................... 694 (132) (b) 217 779
Depreciation and other amortization ................. 159 (46) -- 113
Goodwill amortization ............................... 102 (7) -- 95
------- ------- ------- ------
Total operating expenses ........................... 4,228 (185) 217 4,260
------- ------- ------- ------
Operating Income ......................................... 443 (186) -- 257
Other Income - Net ....................................... 74 (7) -- 67
------- ------- ------- ------
Income Before Interest, Income Taxes, Distributions and
Minority Interest .................................... 517 (193) -- 324
Interest Income .......................................... 59 -- -- 59
Interest Expense ......................................... 370 (53) (d) (44) 273
------- ------- ------- ------
Income Before Income Taxes, Cumulative Effect of Change in
Accounting, Distributions and Minority Interest ..... 206 (140) 44 110
Income Tax Expense ....................................... 70 (42) (e) 13 41
------- ------- ------- ------
Income Before Cumulative Effect of Change in Accounting,
Distributions and Minority Interest .................. 136 (98) 31 69
Cumulative Effect on Prior Years (to December 31, 1999) of
Change in Depreciation Method (Net of (pound)3 million
tax effect) .......................................... 7 (7) -- --
Distributions on Preferred Securities of Subsidiary
Perpetual Trust ...................................... (8) -- -- (8)
Minority Interest ........................................ (15) 10 (c) (3) (8)
------- ------- ------- ------
Net Income ............................................... 120 (95) 28 53
======= ======= ======= ======
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
7
TXU EUROPE LIMITED
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF
INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
((pound) MILLION)
Less
TXU Europe Networks Pro forma Consolidated
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ------------
Operating Revenues ....................................... 6,215 (235) (b) 133 6,113
------ ------ ------- ------
Operating Expenses
Energy purchased for resale and fuel consumed ....... 4,968 -- -- 4,968
Operation and maintenance ........................... 668 (76) (b) 133 725
Loss on sale and transfer of plants ................. 164 -- -- 164
Depreciation and other amortization ................. 122 (23) -- 99
Goodwill amortization ............................... 92 (5) -- 87
------ ------ ------- ------
Total operating expenses ........................... 6,014 (104) 133 6,043
------ ------ ------- ------
Operating Income ......................................... 201 (131) -- 70
Other Income - Net ....................................... 62 (7) -- 55
------ ------ ------- ------
Income Before Interest, Income Taxes, Distributions and
Minority Interest .................................... 263 (138) -- 125
Interest Income .......................................... 36 -- -- 36
Interest Expense ......................................... 292 (42) (d) (33) 217
------ ------ ------- ------
Income Before Income Taxes, Cumulative Effect of Change in
Accounting, Distributions and Minority Interest ..... 7 (96) 33 (56)
Income Tax Expense (Benefit) ............................. (80) (28) (e) 10 (98)
------ ------ ------- ------
Income Before Cumulative Effect of Change in Accounting,
Distributions and Minority Interest .................. 87 (68) 23 42
Cumulative Effect of Change in SFAS No. 133 Treatment
Related to DIG Issue effective July 1, 2001
(Net of(pound)1 million tax effect) .................. (3) -- -- (3)
Distributions on Preferred Securities of Subsidiary
Perpetual Trust ...................................... (8) -- -- (8)
Minority Interest ........................................ (17) 7 (c) (2) (12)
------ ------ ------- ------
Net Income ............................................... 59 (61) 21 19
====== ====== ======= ======
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
8
TXU EUROPE LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
FINANCIAL STATEMENTS
Pro Forma Adjustments
Pro forma adjustments have been made within the condensed consolidated pro forma
financial statements to reflect:
(a) the use of the proceeds of the disposition to pay down debt. The proceeds
for this purpose have been assumed to be(pound)535 million, which is the
estimated proceeds that would have resulted from a disposition occurring on
September 30, 2001. The difference between this and the expected disposal
proceeds of(pound)560 million reflects the expected increase in net assets
of the networks business disposed of between September 30, 2001 and the
expected disposition date. The proceeds have been shown to be used to
retire debt as follows - On November 19, 2001, TXU Europe entered into a
new(pound)1.73 billion Facility Agreement to refinance the
previous(pound)1.075 billion Facility Agreement, the(pound)300 million
364-day Revolving Credit Agreement and certain other debt instruments. The
drawings under the(pound)1.73 billion Facility Agreement were(pound)600
million on the(pound)900 million Tranche A 5-year revolver and(pound)560
million on the 364-day Tranche C revolver. These replaced drawings under
the previous agreements of(pound)750 million (Term),(pound)150 million
(Revolver) under the(pound)1.075 billion Facility Agreement and(pound)260
million under the(pound)300 million 364-day Revolving Credit Agreement. The
net result of this refinancing was to reduce long-term debt by(pound)300
million and to increase short-term debt by(pound)300 million. The proceeds
of the disposition have been assumed to be used to repay borrowings under
the Tranche C revolver. In addition, new issue costs associated with
the(pound)1.73 billion Facility Agreement have been capitalized;
(b) the reversal of inter-company balances, revenues and expenses previously
eliminated;
(c) charges associated with transaction fees and debt restructuring costs
related to, among other things, the retirement of debt and the obtaining of
bond holder consents, net of an amount reflected as a reclassification from
Other Comprehensive Income of amounts (recorded under FAS No. 133) in
respect of interest rate swaps hedging debt retired or assumed. An
adjustment to minority interest to reflect the 10% interest of another
wholly-owned subsidiary of TXU in income statement amounts has been made.
The effect on shareholder's equity of the transaction fees and debt
restructuring costs associated with the transaction is currently estimated
to be (pound)88 million, after tax (these costs are subject to finalization
on the basis of actual circumstance and, therefore, this amount may
increase prior to consummation of the disposition, to up to (pound)105
million). Included within the total charge is a reclassification to
earnings of (pound)25 million (after tax) (recorded under FAS No. 133) from
Other Comprehensive Income in respect of the termination of interest rate
swaps hedging debt that is being retired: This has no effect on
shareholder's equity;
(d) the reduction of interest expense, related interest rate swap expense and
associated debt issue costs resulting from the reduction of debt through
the application of proceeds from the disposition of the networks business.
For this purpose, the debt assumed to be reduced is (pound)535 million of
the term loan under the (pound)1.075 billion Facility Agreement that has
been retired through a combination of borrowings under the (pound)1.73
billion Facility Agreement described in note (a) above and the application
of proceeds from the disposition; and
(e) tax effects of pro forma adjustments at the statutory tax rate of 30%.
9
ITEM 7.
TXU Europe
(c) Exhibits
2.1 Sale and Purchase Agreement Relating to Eastern Electricity Limited, dated
November 19, 2001, among Eastern Electricity Holdings Limited, TXU Europe
Group plc and London Electricity Group plc.
2.2 Sale and Purchase Agreement Relating to 24 Seven Utility Services Limited,
dated November 19, 2001, among TXU Europe Group plc and London Electricity
Group plc.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
TXU Corp.
By: /s/ Biggs C. Porter
-------------------------
Name: Biggs C. Porter
Title: Controller
TXU Europe Limited
By: /s/ Henry Davies
------------------------
Name: Henry Davies
Title: Principal Accounting Officer
Date: November 23, 2001
11
Index to Exhibits
2.1 Sale and Purchase Agreement Relating to Eastern Electricity Limited, dated
November 19, 2001, among Eastern Electricity Holdings Limited, TXU Europe
Group plc and London Electricity Group plc.
2.2 Sale and Purchase Agreement Relating to 24 Seven Utility Services Limited,
dated November 19, 2001, among TXU Europe Group plc and London Electricity
Group plc.
12