Fitch Affirms TXU Corp. at 'BBB-'; Outlook to Stable.

NEW YORK -- Fitch Ratings affirms the ratings of TXU Corp (TXU), TXU US Holdings Co. (Holdings), and TXU Energy Co., LLC (Energy) and revises the Rating Outlook for each of these companies to Stable from Negative. The outstanding ratings of TXU Electric Delivery Co. (Delivery) are affirmed and its Rating Outlook remains Stable. (See the list of affected ratings below.)

The revised Rating Outlook for TXU, Holdings, and Energy is based in part based upon significantly improved earnings and cash flow coverage of debt. The Stable Outlook assumes the elimination of the 'price to beat' at the end of 2006 without pricing constraints imposed by any new Texas law, thus enabling TXU's retail business to be the source of a dynamic hedge for Energy. The Stable Outlook also reflects Fitch's expectation of continued success in risk management of its wholesale and retail operations and that the funding for TXU's new power plant development will largely consist of non-recourse debt and minority equity investments from third parties.

TXU Corp's (TXU's) credit profile benefits from its large fleet of favorably positioned coal and nuclear generating assets in Texas. Fitch notes that improved cash flow and the proceeds from a 2004 securitization of Texas regulatory assets enabled the company to reduce consolidated leverage, as measured by total debt/EBITDA from 4.0 times (x) at year-end 2003 to 2.2x for the 12-month period ended Sept 30, 2006. Fitch's credit concerns include significant debt at the holding company, exposure to natural gas prices and risks associated with the significant new baseload power plant development plan.

At this time the company is in the advanced planning stage for the construction of 9,100 megawatts (mw) of new coal-fired generation capacity in Texas that will be owned and operated by a newly formed wholesale generating subsidiary, TXU Generation Development Company (TXU DEV). The company obtained commitments for non-recourse debt for the 9,100 mw of new generation. Additionally, TXU plans to sell up to 49% of its equity interest in the facilities to minority owners. Additionally, TXU announced on Nov. 6, 2006 a power strategy that includes the development of 16,000 to 23,000 mw of capacity over time which includes the 9,100 mw of new Texas generation described above. The effect of the development of this planned new build in Texas or any subsequent projects upon the ratings of TXU, the parent, and possibly the other TXU subsidiaries will depend upon Fitch's evaluation of more definitive financing terms, construction agreements and structure, as well as the long-term cash flow implications of the projects.

Factors that could result in negative ratings actions for TXU, Energy, US Holdings, and Delivery include increased debt leverage relative to normalized cash flow from operations, or adverse regulatory or competitive developments. In addition, acquisitions or asset disposals resulting in a higher corporate risk profile without a projected improvement in cash flow coverage of debt would be adverse to credit quality. In particular divestiture of Delivery without a partial use of proceeds to reduce leverage could have negative ratings implications as the remaining businesses have a higher overall business risk. At the same time, positive rating actions could result from reduced parent debt, or a demonstrated ability to produce strong and recurring cash flow from the competitive businesses throughout the commodity price cycle.

The following ratings have been affirmed with the Rating Outlooks revised to Stable from Negative:

TXU Corp.:

-- Issuer Default Rating (IDR) 'BBB-';

-- Senior unsecured 'BBB-';

-- Commercial paper 'F3'.

TXU US Holding Co.:

-- IDR 'BBB-';

-- Senior unsecured 'BBB-'.

TXU Energy Co., LLC

-- IDR 'BBB';

-- Senior unsecured 'BBB';

-- Commercial paper 'F2'.

The following ratings are affirmed with a Stable Rating Outlook:

TXU Electric Delivery Co.:

-- IDR 'BBB';

-- Senior unsecured 'BBB+';

-- Commercial paper 'F2'.

TXU Corp. is a holding company with subsidiaries engaged in the generation, delivery and sale of electricity to both the wholesale and retail customers, primarily in Texas.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.