Fitch Rates New TXU Sr Notes `BBB'; Rtg Outlook To Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 18, 2001

Fitch changed TXU Corp.'s (TXU) Ratings Outlook to Negative from Stable.

Ratings affected by the change in Rating Outlook are senior notes rated `BBB', preference stock rating of `BBB-', and short-term rating of `F2'. Fitch also established a rating of `BBB', Rating Outlook Negative for TXU's $800 million issue of series J senior notes. Proceeds of the new notes will be used to repay short-term debt and for general purposes. The series J notes have a maturity of June 15, 2006 and are parity with other senior notes of TXU Corp.

The change in Rating Outlook reflects TXU's high leverage at the parent company and consolidated leverage and the company's changing corporate structure and business profile. Largely as a result of the transformation of the Texas electricity market in January 2002, consolidated net income will come primarily from non-regulated activities (70%). Management intends to reduce parent debt and consolidated leverage with proceeds of asset sales and securitization of TXU Electric Co.'s regulatory assets; however, so far, the reduction of leverage has seen considerable delays. While the company currently seems to be focused on improving its financial condition and rationalizing past investments, there remains a potential for additional debt-financed expansion or acquisitions.

Underlying support for TXU's rating comes primarily from the strong cash flow from the Texas electric business both historically and going forward and improving contributions from the Eastern Energy Group in Europe and TXU Gas in the Texas market. TXU also benefits from a geographically diverse mix of energy businesses, over $40 billion in assets, and substantial customer franchises in Texas, UK, and Australia.

TXU owns four major subsidiaries in the US and abroad, engaging in generation, transmission, and distribution of energy; processing, transmission and distribution of natural gas; and energy marketing, telecommunications, power development and other businesses located primarily in the US, UK, Europe, and Australia. TXU has more than nine million customers in aggregate.

Fitch rates TXU's subsidiaries as follows:

TXU Electric: --First mortgage bonds, secured medium-term notes, and pollution control revenue bonds `A-'.

Texas Utilities Electric Capital I, II, III, IV and V --Secured facilities bonds relating to Texas Utilities Mining Co. leases, unsecured pollution control revenue bonds, preference stock, and trust preference securities 'BBB+'.

TXU Gas Co. --Senior notes 'BBB'.

TXU Australia --Senior unsecured debt 'BBB' (placed on Rating Watch Evolving on May 25, 2001).

TXU Europe plc --Long-term rating 'BBB+'; --Short-term rating 'F2'.

Eastern Electricity plc --Long-term rating 'A-`; --Short-term rating `F2'.