energy future holindings txu_080106
DESCRIPTION
TRANSCRIPT
Second Quarter 2006Earnings Discussion
August 1, 2006
2
Safe Harbor StatementThis 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 release 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 company’s ability to hedge against changes in commodity prices and market heat rates, the company’s ability to fund certain investments described herein, delays in approval of, or failure to obtain, air and other environmental permits, changes in competitive market rules, changes in environmental laws or regulations, changes in electric generation and emissions control technologies, changes in projected demand for electricity in Texas, the ability of the company to attract and retain skilled labor for planning and building new generating units, changes in the cost and availability of materials necessary for the planned new generation units, the ability of the company to manage the significant construction program to a timely conclusion with limited cost overruns, 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 GThis 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.
3
Today’s Agenda
Q&AQ&A
Operational & Power Generation Program
Highlights
Operational & Power Generation Program
Highlights
Financial & Risk Management Overview
Financial & Risk Management Overview
C. John WilderChairman & CEO
Power Generation Program Strategic Scenarios
Power Generation Program Strategic Scenarios
Jonathan SieglerVice PresidentStrategy, Mergers & Acquisitions
David CampbellExecutive Vice President &Acting CFO
4
TXU’s Operational Earnings Improved Substantially
0.60
2.29
YTD 05 YTD 06
Reported earnings per shareYTD 05 vs. YTD 06; $ per diluted share
1.29
2.67
YTD 05 YTD 06
Operational earnings per shareYTD 05 vs. YTD 06; $ per diluted share
0.78
1.59
Q2 05 Q2 06
Operational earnings per shareQ2 05 vs. Q2 06; $ per diluted share
0.701.07
Q2 05 Q2 06
Reported earnings per shareQ2 05 vs. Q2 06; $ per diluted share
53%53% 104%104%
282%282% 107%107%
5
Operational Excellence Is Reflected In Improved Production Levels …
4,2505,098
Q2 05 Q2 06
Nuclear productionQ2 05 vs. Q2 06; GWh
14,855 15,142
Q2 05 Q2 06
Baseload (combined nuclear/lignite)Q2 05 vs. Q2 06; GWh
10,605 10,044
Q2 05 Q2 06
Lignite productionQ2 05 vs. Q2 06; GWh
30,172 31,096
YTD 05 YTD 06
Baseload (combined nuclear/lignite)YTD 05 vs. YTD 06; GWh
20%20% 2%2%
5%5%3%3%
6
…And Improved Delivery Reliability
74.5 73.5
Q2 05 Q2 06
SAIDI (non-storm)Q2 05 vs. Q2 06; minutes
1.15 1.11
Q2 05 Q2 06
SAIFI (non-storm)Q2 05 vs. Q2 06; frequency
1,630
3,830
YTD 05 YTD 06
Vegetation managementYTD 05 vs. YTD 06; miles trimmed
3
161
YTD 05 YTD 06
Cumulative automated metersYTD 05 vs. YTD 06; meters (000’s)
1%1% 4%4%
135%135% N.M.N.M.
7
12
13
14
15
16
17
18
19
Residential single family offers from incumbent providers (cents/kWh)
1 Denotes full, undiscounted Price to Beat. CPL and WTU provide existing residential customers as of 6/30/06 the Direct Electricity PlanTM which is priced at 16.0 and 16.3 cents/kWh respectively in the two service areas. Both price points are also included on the chart. For residential customers with an average usage of 1,500 kWh per month (average for single family). Time periods for prices and offers shown varies. Shows all known offers by incumbent providers in their historical service areas including renewable products as of July 31, 2006. TXU Energy low income discount funded by TXU Energy.
Average Undiscounted PTB 16.4 cents/kWh
Residential customers also have other offers available below PTB from new entrantsResidential customers also have other offers available below PTB from new entrants
TXU Energy Offers 9 Of The 10 Lowest Single Family Prices Among Incumbents In Their Historical Areas…
TXU PTB
CPL PTB1
WTU PTB1
RRI PTB
FC PTB
8
…Contributing To Improved Customer Retention
4.4
3.0
YTD 05 YTD 06
In-territory residential churn rateYTD 05 vs. YTD 06; percent
3.1
1.9
Q2 05 Q2 06
In-territory residential churn rateQ2 05 vs. Q2 06; percent
39%39% 32%32%
9
Key Questions For Today’s Call
1. How is the power generation program progressing?
2. How will the power generation program address the energy challenges facing the US and specifically Texas?
3. How did TXU develop its solution to meet these challenges in Texas?
4. Why did you size the power generation program the way you did?
5. How will this solution improve the environmental profile of Texas?
6. How does TXU view the uncertainty surrounding potential carbon regulation?
7. How does the power generation program fit into TXU’s financial and risk management strategy?
10
Status Update On The Power Generation Program
Key element Status of completion Progress25 50 75 100
PermittingAll permits deemed ‘administratively complete’Town hall meetings with community leadersCommitment letter to TCEQ for 20% net reduction
Plant design and engineering
Completed 20 ‘lean’ workout sessions Nearly 75% complete with the ‘open book’ process
Final engineering Completed Umbrella AgreementDetailed engineering underway
Supply/procurement & construction
Finalized commercial terms for rail car purchaseCompleted agreements for 8 steam turbinesIn negotiations for AQCS and structural steel
Rail infrastructure & transport agreements
Priority routes for dual-rail identifiedEngineering studies underwayTransportation negotiations underway
Fuel supply Multiple parties expressing interest
Forward power and equity sales
Active negotiations for 1.0 GWDiscussions for an additional 1.25 GWFinancial advisors retained for equity sales
Financing Secured $11 billion of non-recourse financingPreparing for syndication of financing
Operational readiness
Defining future-state operating model for powerDesigning training academy
11
Key Execution Metrics For The Power Generation Program
EPC contracts ($ millions, $/kW)
Cost
Construction program metrics
Safety
Expenditure (actual vs. plan $/month)
Rail infrastructure cost ($/kW)
Equipment delivery milestones
Schedule
Material delivery milestones
Construction activity milestones
Commercial operations target date
Substantial completion target date
Facility staffing (% ready)
Facility O&M cost
Facility heat rate
Facility availability
Operations readiness
and start-up
12
Scale Economies Provide Significant Benefits…
Reference plant cost savings vs. single plant
$/kW
Reference plant schedule reduction vs. single plant
Months
1,450 $/kW 140
70701,100 $/kW
70
Lean design/engineering
ConstructionEquipmentprocurement
Referenceplant
Engineer services/ overhead
Single plant estimate
24%
Scale related benefits
60 - 66 10-12
2-33-4
42-443
Early and parallel equipment order
ConstructionLean design/ engineering
Referenceplant
Other supplychain efficiencies
Single plant estimate
32%
•Reference plant scale benefits provide 10% out of the 24% total plant cost reductions•Reference plant scale benefits provide 22% out of the 32% of total schedule reduction
•Reference plant scale benefits provide 10% out of the 24% total plant cost reductions•Reference plant scale benefits provide 22% out of the 32% of total schedule reduction
Scale related benefits
13
...And Have Supported More Effective Procurement Of Equipment And MaterialsTXU has completed most of the “lean” workouts . . .
Foundations/site prepBoiler structural steelCritical pipingCritical valvesFeed and condensate systemCondensate chem. controlsPlant structural steelChimneyCoal handlingCooling towersElectrical controls/DCSRaceway and cableTransformersScope optimization
Start up and commissioningStructural steel erectionBoiler erectionTurbine erectionChem clean and airblowsHydro to turbine roll
Potential identified
Ideas generated
Decisions taken
100%total
70%total
Cost/Design
Schedule/Process
25
25
10
40
100% = $4.2B
8 Reference Plants
Purchasedlater
Initial RFQ issued
In negotiation
Acquired
. . . and has supported equipment and materials procurement
Lean improvement workout status
% Complete
Reference Plant material and equipment% Complete
33% 66% 100%0%
14
Our Customer Research Suggests Customers Want Low-Cost, Dependable Power
58
45
3734
19
Customers ranking electricity provider characteristic “extremely important”06; percent
Source: TXU Survey, n=100
Dependable/provides
exceptional service
Has competitive
rates
Appreciates customer’s business
Offers money-saving
products
Is an innovative
leader
15
Key Elements Of The Technology Review
1.51
1.35
2.174
1.66
0
0.37
0
Emission costs
($/MWh)
9.1
8.2
8.5
10.0
n/a
7.0
n/a
Heat rate(MMBtu/
MWh)
94
85
85
94
95
601
36
Capacity factor
(%)
4
6
6
4
10
2
1
Construc-tion time
(years)
1,100
1,600
1,800
1,000
2,5002
700
1,400
Capital cost
($/kW)
64-6728Ultrasuper-critical coal
48-5122Super-critical coal
71-74
47-50
743
74
87
Break-even price
($/MWh)
12CCGT
44IGCC
22Sub-critical coal
50Advanced nuclear
53
O&M
($/kW-yr)
Wind
Technology
1 Represents capacity factor of current CCGT in ERCOT.2 Includes decommissioning and spent fuel storage3 Represents breakeven power price without government subsidies. 4 Assumes burning bituminous coal.
Unproven technology
16
Announced New Coal-Based Generation Development By Technology In US And Europe
38
10
843
Pulverized coal IGCC
Capacity announced, planned or under construction06; GW
Source: Energy Velocity, Platts, company press releases
Europe
US
122
13
Even in markets facing carbon constraints, pulverized coal is the technology of choice
Even in markets facing carbon constraints, pulverized coal is the technology of choice
17
TXU Will Continue To Invest In Technologies Across All Horizons
Strategic growth horizons
Horizon 1
Technologies commercially viable today
Supercritical coalSub-critical coalWind, Hydro Steam turbine technologies
Horizon 2
Horizon 3
Horizon 4
Technologies commercially viable in 5-15 yearsUltra-supercritical coalSupercritical retrofitsIGCC
Technologies commercially viable in 15-25 yearsNext generation nuclear
Technologies commercially viable in more than 25 years
SolarHydrogenFusion
18
The TXU Model Provides A Distinct Competitive Advantage
The TXU model provides more than a $12/MWh all in cost advantage over the typical builder
The TXU model provides more than a $12/MWh all in cost advantage over the typical builder
60-634
7
48-511
Typical competitor
build
Breakeven power price 06; $/MWh
Capital cost advantage
($1,450 $1,150)
Operational advantage
(CF 90% 94%)
Build schedule advantage
(6 yrs 4 yrs)
TXU reference
plant
19
0.02
0.12
0.18
0.24 0.250.28 0.29 0.30 0.30
0.42
0.27
CA TX NY GA NJ IL FL US avg PA MI OH
Texas Has One Of The Cleanest Generating Fleets In The Country
Improvements in coal will continue to increase efficiency of the Texas portfolio and reduce its emissions profile
Improvements in coal will continue to increase efficiency of the Texas portfolio and reduce its emissions profile
Average NOx emission rates for 10 most populous states04; Lbs/MMBtu
Source: TCEQ
20
Mobile Sources Account For The Overwhelming Majority Of NOx Emissions And Ozone In North Texas
51
27
11
8 3
NOx emissions within DFW area05; percent
100% = 520 tons/day
On-roadmobile
Off-road mobile
Point sources
Area sources
Electric generation units
The expectation is that electric generation units will remain a minimal contributor to North Texas NOx emissions and DFW ozone
The expectation is that electric generation units will remain a minimal contributor to North Texas NOx emissions and DFW ozone
40
135
2
40
Contribution to peak ozone days1
Aug 09E; percent
100% = 95 ppb peak ozone (8 day average)
Background per EPA model
Biogenic
DFWarea man-made
Non-DFW man-made
Electric generation units2
1 TCEQ testimony, 7/13/06: “Future case contributions to DFW ozone”; average for 8 days in August 09 from DFW SIP modeling (using 05 emissions baseline)2 Generation units includes the 9 largest coal units (~1%) plus all other EGUs in region (~1%); ‘man-made’ totals exclude EGU total shown separately.
21
TXU Developing The Cleanest Large-Scale Coal Fleet In U.S.SO2 emissionsLbs/MMBtu
The combination of investment in the newest emissions control technology and an innovative voluntary retrofit program will make TXU’s coal fleet the
cleanest large-scale fleet in the nation
The combination of investment in the newest emissions control technology and an innovative voluntary retrofit program will make TXU’s coal fleet the
cleanest large-scale fleet in the nation1 TXU after new power generation development program and retrofitsSource: EPA
0.880.950.980.981.051.05
1.231.261.271.291.34
1.611.67
0.310.470.49
0.660.730.76
TXUABCDEFGHI
JKLMNOPQR
NOx emissionsLbs/MMBtu
0.300.320.330.340.340.350.350.350.360.390.400.410.42
0.050.10
0.200.240.290.30
TXUBGFKNHEJLRCPDQOI
AM
3.463.793.893.98
4.434.554.915.085.115.125.41
5.986.31
3.383.33
3.123.082.98
2.39CTXU
FPI
QADKJGEHOLNRMB
Hg emissionsMillionths of lbs/MMBtu
1 1
1
22
Benefits Of The Power Generation Program
Better reliabilityBetter reliabilityProvide 5 years worth of urgently needed suppliesIncrease reserve margins back to safe levels, averting blackouts, scarcity pricing, limits to economic growth
Lower costsLower costsLower wholesale electricity costs by $1.7 billionEnable long-term wholesale offers up to 20% off short-termReduce Texas’ over-reliance on high-priced natural gas
Cleaner airCleaner airReduce key emission totals by 20%, rates by nearly 70%Invest $2.5 billion in latest environmental technology Protect air quality, including urban non-attainment areas
Stronger economyStronger economy
Create jobs: 40,000 during construction, 21,000 ongoingDrive a $14 billion increase in annual gross state productAdd tens of millions of dollars in local property taxes
23
Today’s Agenda
Q&AQ&A
Operational & Power Generation Program
Highlights
Operational & Power Generation Program
Highlights
Financial & Risk Management Overview
Financial & Risk Management Overview
C. John WilderChairman & CEO
Power Generation Program Strategic Scenarios
Power Generation Program Strategic Scenarios
Jonathan SieglerVice PresidentStrategy, Mergers & Acquisitions
David CampbellExecutive Vice President &Acting CFO
24
36 37 3943
4850-55
65 75 85 95 05 15E
Coal Generation Has Made Impressive Efficiency Gains Over The Last 40 Years And The Trend Is Expected To Continue
Improvements in coal will continue to increase efficiency and reduce its emissions profile
Improvements in coal will continue to increase efficiency and reduce its emissions profile
Maximum coal plant thermal efficiency 65-15E; percent
33%
25
Estimated Costs Of Green House Gas Mitigation
1 Includes transportation (0-5 $/ton) and geological (0.6-8.3 $/ton) storage costs. Based on technology using bituminous coal as feedstock. Based on coal prices of $1-1.50 per MMBtu
Source: Boston Consulting Group, IPCC Special Report – Carbon Dioxide Capture and Storage; MIT; EPA
HFC-23 destruction
Landfill gas capture/flaring
Manure management
Steam system improvements
Compressor pump efficiency
Water waste treatment
Renewable power (non-biomass)
IGCC w/CO2 capture and storage1
0.50-1
1-4
3-6
5-10
5-10
10-15
30-40
15-50
TXU expects the cost of supercritical retrofits to be drastically reduced over the next 15 years
TXU expects the cost of supercritical retrofits to be drastically reduced over the next 15 years
Cost to mitigate green house gas emissions$/ton
45-65Supercritical coal retrofit
26
Today’s Agenda
Q&AQ&A
Operational & Power Generation Program
Highlights
Operational & Power Generation Program
Highlights
Financial & Risk Management Overview
Financial & Risk Management Overview
C. John WilderChairman & CEO
Power Generation Program Strategic Scenarios
Power Generation Program Strategic Scenarios
Jonathan SieglerVice PresidentStrategy, Mergers & Acquisitions
David CampbellExecutive Vice President &Acting CFO
27
TXU Corp. And Energy Holdings Showed Strong Growth During The Quarter…
0.71
1.51
Q2 05 Q2 06
TXU Energy Holdings
Operational earnings contribution by segmentQ2 05 vs. Q2 06; $ per diluted share
0.78
1.59
Q2 05 Q2 06
TXU Corp. Consolidated
0.18 0.18
Q2 05 Q2 06
TXU Electric Delivery
113%113%
104%104%
28
…As Well As Year-To-Date…
0.32 0.32
YTD 05 YTD 06
TXU Electric Delivery
1.14
2.61
YTD 05 YTD 06
TXU Energy Holdings
Operational earnings contribution by segmentYTD 05 vs. YTD 06; $ per diluted share
1.29
2.67
YTD 05 YTD 06
TXU Corp. Consolidated
107%107%
129%129%
29
…At The Same Time, The Business Continues To Drive Cost Leadership
592 577
YTD 05 YTD 06
TXU Energy Holdings and TXU CorpTotal operating costs and SG&A expense1
YTD 05 vs. YTD 06; $ millions
312 285
Q2 05 Q2 06
TXU Energy Holdings and TXU CorpTotal operating costs and SG&A expense1
Q2 05 vs. Q2 06; $ millions
9%9% 3%3%
1 Excludes TXU Electric Delivery
30
TXU Substantially Improved Financial Flexibility Measures…
4.0
2.5
Q2 05 Q2 06
Debt/EBITDAQ2 05 vs. Q2 06; percent
4.55.8
YTD 05 YTD 06
EBITDA/interestQ2 05 vs. Q2 06; ratio
61
1,049
YTD 05 YTD 06
Free cash flowYTD 05 vs. YTD 06; $ millions
594
1,904
YTD 05 YTD 06
Operating cash flowYTD 05 vs. YTD 06; $ millions
221%221% N.M.N.M.
38%38%29%29%
31
…Reaching Top Quartile Levels In The Sector…
Financial metrics for peer group1 (n=25)03-062; various measures
4th Quartile 3rd Quartile Median 2nd Quartile
Total debt/EBITDA(X)
6.0 4.2 3.5 2.8 1.7
Total debt/ enterprise value(%) 71.7 47.3 42.1 39.1 20.6
TXU LTM2
Top
TXU 03
EBITDA/interest(X)
3.6 4.5 5.5 6.72.3
1 Combined SPELEC and S&P Multi-Utility Index.2 Quartiles based on LTM as of Mar 06 performance; TXU performance based on LTM ended Jun 06.
TXU 05
4.0 4.9 5.8#6
4.2 3.1 2.5#2
42.7 34.2 31.8#3
3.0
5.1
64.8
TXU 04
32
~0-10~0-10~(10)-0Expected underlying position
~99~99~99Percentage hedged
(170)
(310)
480
09E
(150)
(330)
480
08E
(110)Natural gas hedges
(370)Retail and wholesale activity2
470Total “generation long” position
07E
Natural gas position07E-09E; million MMBtu
Heat rate position07E-09E; million MWh
(30)(31)(36)Retail and wholesale activity2
~33~31~24Expected underlying position
~48 ~50 ~60 Percentage hedged
n.a.
63
09E
n.a.
62
08E
n.a.Natural gas hedges
60Total “generation long” position1
07E
…And Significantly Reduced Natural Gas Price Exposure…
TXU has mitigated almost 100% of its estimated natural gas exposure from 07-09 while maintaining the majority of its long-term heat rate exposure. Since October 2005, TXU has also reduced its 2009-2011 natural gas exposure by a cumulative 1 billion MMBtu
TXU has mitigated almost 100% of its estimated natural gas exposure from 07-09 while maintaining the majority of its long-term heat rate exposure. Since October 2005, TXU has also reduced its 2009-2011 natural gas exposure by a cumulative 1 billion MMBtu
1 Includes solid fuel and gas plants; excludes any new plant construction.2 Assumes native market retail position diminishes over time (currently approximately 8% annually) due to competitor activity and acts as a short position
while net margin remains at or below sustainable range of 5 to 10%.
33
…Resulting In Low Exposure To Near Term Commodity And Heat Rate Movements
EBITDA impact of $1/MMBtu change in natural gas1
07E-09E; $ millions
EBITDA impact of 0.2 MMBtu/MWh change in market heat rate1
07E-09E; $ millions
As a result of the commodity hedging program, TXU has a relatively low sensitivityto natural gas price and heat rate changes over the next three years
As a result of the commodity hedging program, TXU has a relatively low sensitivityto natural gas price and heat rate changes over the next three years
Change in EBITDA (%) <1% <1% <1% <1% <1% ~1%
1 Based on NYMEX natural gas prices as of 6/30/06; based on estimated natural gas and heat rate exposure as described in position tables. Excludes any new plant construction.
07E 08E 09E 07E 08E 09E
~40
~55 ~55
~0-10 ~0-10 ~0-10
34
Hedging And Project Financing Provide An Efficient Vehicle For The Power Generation Program
0%-7%-39%-35 percent8%8%-19%-30 percent
37%37%21%-20 percent 96%96%100%0 percent (as of July 21)
Case 3Hedging/
project financing
Case 2Hedging/
no project financing
Case 1No hedging/
no project financing
Shift in the natural gas curve ($/MMBtu)
0%-51%-98%-50 percent
154%154%179%+20 percent
Indicative sensitivity of the power generation program to TXU relative to natural gas price Jul 06; percent1
1 Percent of Case 1 baseline value using current forward curve as of July 21, 2006.
35
Today’s Agenda
Q&AQ&A
Operational & Power Generation Program
Highlights
Operational & Power Generation Program
Highlights
Financial & Risk Management Overview
Financial & Risk Management Overview
C. John WilderChairman & CEO
Power Generation Program Strategic Scenarios
Power Generation Program Strategic Scenarios
Jonathan SieglerVice PresidentStrategy, Mergers & Acquisitions
David CampbellExecutive Vice President &Acting CFO
Appendix –Regulation G Reconciliations
37
Financial Definitions
Cash provided by operating activities.Operating Cash Flow (GAAP)
Income from continuing operations net of preference stock dividends, excluding special items. 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)
Total debt less transition bonds and debt-related restricted cash.Debt
Total debt less transition bonds and debt-related restricted cash divided by EBITDA. 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. Debt/EBITDA is a measure used by TXU to assess credit quality.
Debt/EBITDA (non-GAAP)
Operating revenues (GAAP) less fuel and purchased power costs and delivery fees (GAAP).Contribution Margin
Cash from operating activities, 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.
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
DefinitionMeasure
38
Financial Definitions – cont.
Per share (diluted) net income available to common shareholders.Reported Earnings per Share (GAAP)
Per share (diluted) income from continuing operations net of preference stock dividends, excluding special items. Operational earnings for first quarter 2005 excludes the effect of the adjustment in 2005 for the cost of the true-up payment on the 52.5 million-share accelerated common stock repurchase.
Operational Earnings per Share (non-GAAP)
Long-term debt (including current portion), plus bank loans and commercial paper, plus long-term debt held by subsidiary trusts and preferred securities of subsidiaries.
Total Debt (GAAP)
Operational earnings (non-GAAP) plus preference stock dividends plus after-tax interest expense and related charges, net of interest income on restricted cash related to debt, divided by the average of the beginning and ending total capitalization less debt-related restricted cash. This measure is used to evaluate operational performance and management effectiveness.
Return on Invested Capital (ROIC) - (non-GAAP)
Unusual charges related to the implementation of the performance improvement program and other charges, credits or gains, that are unusual or nonrecurring. Special items are included in reported GAAP earnings, but are excluded from operational earnings.
Special Items (Non-GAAP)
DefinitionMeasure
39
Table 1: TXU Corp. Operational Earnings Reconciliation Quarter Ended June 30, 2006 and 2005$ millions and $ per share after tax
0.07---Effect of share repurchase dilution
381
2
(4)
383
4
4
375
Q2 05
1.59
0.52
-
1.07
-
-
1.07
Q2 06
0.78739Operational earnings
-242Special items
(0.01)-Preference stock dividends
0.72497Income from continuing operations
0.01-Preference stock dividends
0.01-Discontinued operations
0.70497Net income available for common
Q2 05Q2 06
40
Table 2: TXU Corp. Operational Earnings Reconciliation Year-to-Date June 30, 2006 and 2005$ millions and $ per share after tax
1.02---Effect of share repurchase dilution
628
(152)
(10)
790
10
(11)
791
YTD 05
2.67
0.51
-
2.16
-
(0.13)
2.29
YTD 06
1.291,255Operational earnings
(0.31)242Special items
(0.02)-Preference stock dividends
0.601,013Income from continuing operations
0.02-Preference stock dividends
(0.02)(60)Discontinued operations
0.601,073Net income available for common
YTD 05YTD 06
41
Table 3: TXU Energy Holdings Operational Earnings ReconciliationQuarter Ended June 30, 2006 and 2005$ millions and $ per share after tax
0.713450.99461Income from continuing operations
0.713440.99461Net income available for common
-20.52243Special items
347
1
Q2 05
1.51
-
Q2 06
0.71704Operational earnings
--Discontinued operations
Q2 05Q2 06
42
Table 4: TXU Energy Holdings Operational Earnings ReconciliationYear-to-Date June 30, 2006 and 2005$ millions and $ per share after tax
1.135482.09981Income from continuing operations
1.125442.09981Net income available for common
0.0140.51243Special items
552
4
YTD 05
2.61
-
YTD 06
1.141,224Operational earnings
0.01-Discontinued operations
YTD 05YTD 06
43
Table 5: TXU Electric Delivery Operational Earnings Reconciliation Quarter Ended June 30, 2006 and 2005$ millions and $ per share after tax
----Special items
86
86
Q2 05
0.18
0.18
Q2 06
0.1886Operational earnings
0.1886Income from continuing operations
Q2 05Q2 06
44
Table 6: TXU Electric Delivery Operational Earnings Reconciliation Year-to-Date June 30, 2006 and 2005$ millions and $ per share after tax
0.321570.32151Income from continuing operations
-1--Special items
158
YTD 05
0.32
YTD 06
0.32151Operational earnings
YTD 05YTD 06
45
Table 7: TXU Corp. Operating Cash Flow and Free Cash Flow Year-to-Date June 30, 2006 and 2005$ millions, unless otherwise noted
611,049Free cash flow
(26)
(507)
594
YTD 05
(30)Nuclear fuel
(825)Capital expenditures
1,904Reported cash provided by operating activities
YTD 06
46
Table 8: TXU Corp. Total Debt As of June 30, 2006 and 2005$ millions
11,32510,872All other long-term debt, less due currently
1,313169Long-term debt due currently
Notes payable:
13,996
38
1,320
-
6/30/05
1,240Banks
1,263Commercial paper
-Preferred securities of subsidiaries
13, 544Total debt
Debt
6/30/06
473.3
5.8
2.5
5.8
12,324
(100)
(1,120)
13,544
859
24
(14)
849
4,961
314
4,647
811
(49)
849
1,038
1,998
(2,105)
4,103
6/30/06
7.5
3.6
4.0
4.5
12,784
-
(1,212)
13,996
712
16
(25)
721
3,220
647
2,573
769
(41)
721
293
831
(1,034)
1,865
6/30/05
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
12/31/04
4.8
4.5
3.1
4.9
12,213
-
(1,167)
13,380
801
17
(18)
802
3,919
(18)
3,937
776
(48)
802
632
1,018
(1,775)
2,793
12/31/05
252Income tax expense
A2,413Cash provided by operating activities
B(1,847)Reconciling adjustments from cash flow statement
724Depreciation 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
12/31/03
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)
ETotal debt
Interest expense and related charges
FTotal debt less transition bonds and debt-related restricted cash
Debt-related restricted cash
EBITDA
Transition bonds
DCash interest expense
Capitalized interest
Amortization of discount and reacquired debt expense
CEBITDA (excluding special items)
Special Items
Interest income
Interest expense and related charges
Income from continuing operations before extraordinary items andcumulative effect of changes in accounting principles
Ref
Table 9: TXU Corp. Interest and Debt Coverage RatiosTwelve Months Ended June 30, 2006 and 2005$ millions unless otherwise noted
48
YTD 2006 2005 2004 2003
DebtNotes payable 2,503 798 210 -Long-term debt due currently 169 1,250 229 678 Long-term debt held by subsidiary trusts - - - 546 Other long-term debt less due current 10,872 11,332 12,412 10,608 Transition bonds (1,120) (1,167) (1,258) (500) Preferred securities of subsidiaries - - 38 759
Total debt less transition bonds 12,424 12,213 11,631 12,091 Preference stock - - 300 300
Total debt and preference stock 12,424 12,213 11,931 12,391
Market capitalizationShares outstanding 462 471 480 648 Price per share 59.79 50.19 32.28 11.86
Total market capitalization 27,623 23,639 15,494 7,685
Cash and debt-related restricted cash (235) (107) (202) (1,423)
Enterprise value 39,812 35,745 27,223 18,653
Total debt/enterprise value (%) 31.8 34.2 42.7 64.8
Table 10: TXU Corp. Debt to Enterprise Value Year-to-Date June 30, 2006 and Twelve Months Ended December 31, 2005, 2004 and 2003$ millions, unless otherwise noted