Fitch Rates TXU's Feline PRIDES 'BBB'.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 5, 2002

Fitch Ratings assigns a 'BBB' rating to TXU Corp.'s (TXU) $440 million Feline PRIDES (initially consisting of 8,800,000 Income PRIDES). The Rating Outlook is Stable. Each unit of Income PRIDES will consist of a contract to purchase TXU common shares at the settlement date (May 16, 2006) and an interest in like amounts of TXU senior notes that are rated 'BBB' maturing May 16, 2008 (with a rate reset on or after Nov. 16, 2005). The senior notes will be pledged to secure the unitholders' contractual obligation to purchase shares of TXU at the contract settlement dates. The return to investors will depend on the value of TXU's common stock at the contractual settlement date. The rating does not comment on the expected common equity value. Proceeds will be used for working capital and other general purposes, including the repayment of commercial paper and to provide advances to subsidiaries for the purpose of funding investments in the US, Europe, and Australia.

The ratings take into account TXU's holding company structure and reliance on upstream cash flows from subsidiaries that have individual debt to service parent debt. Additionally the rating reflects the high percentage of consolidated net income and cash flow coming from non-regulated activities. TXU has made progress in reducing consolidated leverage and remains committed to reducing parent company debt. Reductions in consolidated leverage result primarily from asset sales over the last year. Net Debt to capitalization is about 63% and is projected to decline to about 56% by year-end, reflecting asset sales, securitization, and adjustments for hybrid equity.

While parent level debt remains high, management continues to take steps to refund straight debt and commercial paper with mandatorily convertible securities and common equity. Other debt is earmarked for paydown from proceeds of asset sales and the expected securitization of Oncor Electric Delivery Co.'s (Oncor) regulatory assets (about $1.3 billion). While it is likely that TXU will make additional investments or acquisitions, management has indicated an intention to fund them with 50% equity and 50% debt, thereby continuing to enhance the capital structure to a level comparable to that of similarly rated holding companies.

TXU owns four major subsidiaries in the US and abroad, engaging in generation, transmission, and distribution of energy; transmission and distribution of natural gas; and energy marketing, telecommunications, and other businesses located primarily in the US, UK, Europe, and Australia. TXU has more than 11 million customers in aggregate.

Fitch rates the obligations of TXU and its subsidiaries as follows:

TXU Corp.

--Senior unsecured notes 'BBB';

--Commercial paper 'F2'.

TXU U.S Holdings Co. (formerly TXU Electric)

--Senior unsecured debt 'BBB+';

--Preferred stock 'BBB+'.

Oncor

--First mortgage bonds 'A-';

--Implied senior unsecured debt 'BBB+';

TXU Energy Co. LLC 

--Senior unsecured bonds 'BBB+'.

TXU Gas Co.

--Senior notes 'BBB'.

TXU Europe Ltd

--Long-term rating 'BBB';

--Short-term rating 'F3'.

TXU Australia Holdings Ltd.

--Partnership senior unsecured debt 'BBB'.