Sabine River Authority, TX -TXU Proj- Pollution Control Revs Rated 'BBB' By Fitch.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 23, 2003

Fitch Ratings assigns a 'BBB' rating to Sabine River Authority of Texas, pollution control revenue refunding bonds (TXU Energy Company LLC Projects) $12,390,000 series 2003A due 2022. Principal and interest will be paid through a pledge of payments made by TXU Energy Company LLC (TXU Energy). Fitch rates TXU Energy's outstanding senior unsecured debt 'BBB'. The Rating Outlook for TXU Energy is Stable.

The rating is based upon the credit quality of TXU Energy, a non-utility power generation and supply company. The ratings take into consideration TXU Energy's capital structure of approximately 2.8 times (x) net debt-to-EBITDA, sufficient liquidity to meet refinancing needs, solid cash flow interest coverage of 6.7x, and a currently low retail churn ratio in Texas. However, the rating also takes into account Fitch's view that currently high margins earned by retail power suppliers in Texas are likely to moderate over time if price competition becomes more prevalent in that market, though this is not an immediate concern. An additional concern is the current over-supply of generation in Texas that has placed pressure on the energy spot market and has limited the profitability of TXU Energy's favorable generation portfolio.

TXU's ratings and Stable Outlook takes into account the existence of sufficient liquidity to meet expected company wide refinancing and potential collateral requirements, as well as a recent favorable settlement, with parties who had appealed a Public Utilities Commission of Texas order approving TXU regulatory settlement plan, that should pave the way for Oncor Electric Delivery Co. to issue securitization bonds (totaling $1.3 billion). The Stable Outlook for TXU also factors in Fitch's view that TXU will not have a material liability for TXU Europe obligations (the obligations of TXU Europe are currently rated 'D').

Factors that could result in higher future ratings for TXU and its affiliates are: the TXU group's ability to reduce consolidated debt and leverage measures during 2003-2004; sustained improvement in operating performance of TXU Gas and TXU Australia; and stable operating performance and margins continuing at TXU Energy despite the constrained credit and business environment. Ratings could be lowered from the current levels in the event of substantial, unanticipated erosion in TXU Energy's margins, possibly as a result of more aggressive price competition evolving in the retail supply market, or an unexpected liability for material obligations of TXU Europe.

TXU Energy is an indirect wholly owned subsidiary of TXU Corp and is a non-utility energy company that is engaged in power production, wholesale energy sales, retail energy sales and wholesale trading primarily in the state of Texas.