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energy future holindings _share_0703

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  • 1. Report to Shareholders July 1, 2003 www.txucorp.com TXU Communications Dear Shareholders, I am pleased to report that with solid first-quarter financial results and Offered for Sale continued operational progress we are on track to achieve our 2003 initia- TXU is selling its interests in the tives. Our key priorities are to strengthen our balance sheet and enhance telecommunications business. The credit, reduce costs, deliver on earnings, and aggressively defend and build decision to sell TXU Communica- on our leadership positions in Texas and Australia. tions is part of a continued focus on A number of key achievements demonstrate our progress this year. the company’s core energy business On May 1, we reported first-quarter earnings that were above expectations. in Texas and Australia. The pro- We also announced our plan to sell TXU Communications to continue our ceeds will be used to repay debt, focus on the core energy business in Texas and Australia. including the Pinnacle One senior TXU has also been successful in accessing the capital markets. We have secured notes, which mature in added permanent financing to our operations and reduced our reliance August 2004. Pinnacle One is the on bank facilities. This year, we have successfully issued $1.25 billion of joint venture formed in 2000 to notes in a debt offering and refinanced $220 million of pollution-control hold the telecom assets. It is now a revenue bonds. We have also repaid all our cash borrowings from banks in wholly owned subsidiary of TXU. North America, some $2.3 billion, and replaced expiring bank facilities. TXU Communications includes We are on track to deliver significant cost reductions as well. Regret- two rural telephone companies, tably, employee layoffs have been necessary to help TXU return to Lufkin-Conroe Telephone Exchange financial viability, but the majority of these staff reductions have been and Fort Bend Communications, in completed. southeast Texas. TXU acquired TXU continues to perform well in its Texas and Australia regions. We Lufkin-Conroe in 1997 and Fort are competing strongly in newly deregulated retail energy markets, retain- Bend in 2000. The sale’s completion ing and attracting customers ahead of plan. And our energy delivery oper- is expected by mid-2004. ations continue to provide reliable, low-cost service. National Large C&I Gas Through the dedication and commitment of employees, we have stabi- lized TXU financially, and we are now focused on enhancing operations Business Sold and delivering on our 2003 initiatives. As part of the company’s focus I am grateful for your continued support of TXU. to reduce costs and allow greater concentration on its leading posi- tion in the Texas energy markets, TXU Energy has sold its large com- mercial and industrial (C&I) retail natural gas business in the North- Erle Nye east, Midwest, and West. This oper- Chairman of the Board and Chief Executive ation provided natural gas and related services to businesses throughout the United States. TXU Annual Meeting Held vice president; H. Dan Farell, Energy continues to serve C&I retail executive vice president and chief At the annual meeting on May customers in Texas. TXU Gas, the financial officer; Michael J. 16, shareholders elected the follow- regulated retail business that serves McNally, executive vice president; ing directors: Derek C. Bonham, almost 1.5 million residential cus- Eric H. Peterson, executive vice Jerry S. Farrington, William M. tomers in Texas, is a separate busi- president and general counsel; Griffin, Kerney Laday, Jack E. Little, ness and is not affected by the sales. Kirk R. Oliver, treasurer and assis- Margaret N. Maxey, Erle Nye, James TXU Gas Files Rate Case tant secretary; Peter B. Tinkham, E. Oesterreicher, Michael W. Ranger, secretary and assistant treasurer; and Herbert H. Richardson. Share- TXU Gas has filed a systemwide Diane J. Kubin, assistant secretary; holders also approved Deloitte & gas rate case with the Railroad and Stanley J. Szlauderbach, assis- Touche, LLP, as TXU’s auditors. Commission of Texas and the 437 tant controller. Shareholders voted against share- incorporated cities and towns served The board also declared a quar- holder proposals related to indexed by TXU Gas. The request represents terly dividend of $0.125 per share options and a new environmental an annual revenue increase of on common stock of the company. report. For those interested, a $69.5 million, which represents an The dividend will be paid on July recording of the meeting is available 11.5 percent return on equity and 1, 2003, to shareholders of record on the company’s website at an 8.99 percent return on invested on June 6, 2003. If you are not www.txucorp.com. capital. participating in the Direct Stock In other company action, the TXU Gas has invested about Purchase and Dividend Reinvest- board of directors elected the fol- $721 million in its pipeline and ment Plan or in the direct deposit lowing officers: Erle Nye, chairman distribution systems in the last five option and your shares are not of the board and chief executive; years to continue providing safe being held in a brokerage account, Thomas L. Baker, executive vice and reliable natural gas service. your dividend check is enclosed. president; Brian N. Dickie, executive A successful outcome of the rate
  • 2. Management Changes case will improve TXU Gas’s rate of experience in accounting, internal return and its ability to continue to audit, and customer operations. Announced provide safe, reliable and reasonably Hogan is a certified public account- TXU has made a number of man- priced natural gas to almost ant and will also report agement changes this year designed 1.5 million customers across Texas. to Farell. to strengthen its executive team. Legislative Session Ends TXU Honored with Awards The board of directors elected H. The 78th session of the Texas TXU has been honored with two Dan Farell executive vice president Legislature ended June 2, 2003, awards recently for its environmen- and chief financial officer of TXU with passage of three bills that tal accomplishments. The U.S. Corp. Farell, a certified public affected TXU. Two of the bills Environmental Protection Agency accountant, has over 30 years of favored by TXU affect the com- has selected Oncor as the ENERGY diverse experience in the energy pany’s Comanche Peak nuclear STAR Partner of the Year for 2003. industry. In 1994, he was appointed power plant. One bill increases the Oncor was chosen from more than principal accounting officer for authority of nuclear plant security 7,000 organizations for contribut- Texas Utilities Company and princi- officers, allowing the state’s two ing to the reduction of nearly pal financial officer of its main sub- nuclear plants to comply with 30 million pounds of greenhouse- sidiary, TU Electric. He was made heightened security measures gas emissions. managing director of TXU Australia recently issued by the Nuclear Regu- TXU Mining has once again following acquisition of that sub- latory Commission. The second bill received the Mining Reclamation sidiary in 1995. He returned to lead establishes disposal sites for low- Award from the Railroad Commis- TXU’s electric and gas distribution level radioactive waste. The facili- sion of Texas for its overall efforts unit in 1998 and assumed his most ties will be environmentally sound, in planting more than 20 million recent position as president of TXU permitted, and monitored. They trees since 1975 at the company’s Gas in 2002. will allow Comanche Peak and mining sites. Since 1991, TXU’s Mike McCall, formerly vice presi- other entities in Texas that produce commercial pine stands have dent of regulatory affairs, is now such waste to relocate it to a perma- sequestered an estimated 92,000 president of TXU Gas. He replaces nent storage site. tons of carbon dioxide. The com- Dan Farell. McCall has held a vari- The other bill, Texas GRIP (Texas pany also plants a large variety of ety of management positions over Gas Reliability Infrastructure Pro- hardwood trees and shrubs for his 20-year career at TXU, including gram), will stimulate investment in wildlife habitat. director of public policy. He also the natural gas delivery system and In the past decade, TXU has held positions in finance and help the company recover regulated voluntarily reduced, avoided, or accounting, strategy, and planning. costs more quickly. Infrastructure sequestered over 193 million tons McCall began his career at TXU investments are needed to meet the of greenhouse gases. This effort is Mining Company, where he served growing demands of the Texas econ- the largest achievement of any as manager of two of the company’s omy and to maintain a safe and investor-owned energy company lignite mines. reliable gas delivery network. in the nation. David H. Anderson, formerly vice TXU opposed several bills that president of investor relations, has would have changed the rules gov- been appointed senior vice presi- This report contains forward-looking statements, erning the new competitive market which are subject to various risks and uncertainties. dent and principal accounting Discussion of risks and uncertainties that could cause to favor various market participants. officer. In his new role, Anderson is actual results to differ materially from management’s TXU believes the market needs to responsible for accounting policies, current projections, forecasts, estimates and expecta- tions is contained in the company’s SEC filings. The continue with clear and consistent financial reporting, and financial risks and uncertainties set forth in the company’s SEC rules to develop to its fullest poten- planning. He continues to report filings include TXU’s ability to negotiate satisfactory tial. Ultimately, the legislature terms and obtain all necessary governmental and to Farell. Anderson is a certified other approvals and consents for the sale of TXU agreed and allowed those bills to public accountant and joined the Communications, prevailing government policies on expire in committee. The legislature company in 1988. He has held environmental, tax or accounting matters, regulatory and rating agency actions, weather conditions, unan- is expected to take a closer look at numerous financial and manage- ticipated population growth or decline and changes laws affecting the electric industry ment positions in the TXU system. in market demand and demographic patterns, during the Public Utility Commis- changing competition for customers including the Tim Hogan is now director of deregulation of the U.S. electric utility industry and sion sunset process in its 2005 investor relations, assuming Ander- the entry of new competitors, pricing and transporta- session. The Texas Legislature meets son’s role. Hogan, who came to tion of crude oil, natural gas and other commodities, financial and capital market conditions, unantici- every other year, although special investor relations in 1997, joined pated changes in operating expenses and capital sessions can be called. TXU in 1982. He has extensive expenditures, legal and administrative proceedings and settlements, inability of the various counterpar- ties to meet their obligations with respect to financial instruments, and changes in technology used and Visit txucorp.com! services offered by TXU Corp. NYSE Stock Ticker:TXU Check out txucorp.com for the latest information about the company. In the 1601 Bryan Street Investor Resources section, you’ll find shareholder information, current news releases, Dallas,Texas 75201-3411 financial presentations, live webcasts and replays of quarterly earnings conference TXU Business Services calls and analyst meetings, SEC reports, and more. Shareholder Services Go to the Environment section for the 2002 TXU Environmental Review. Our 12th P.O. Box 130059 Dallas,Texas 75313-0059 annual environmental report details a tradition of environmental excellence through 1-800-828-0812 a commitment to continuous improvement. You can view the report online or sign up for a print copy. Printed on recycled paper

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