Quarter to Quarter Aggressive Growth Stocks

[jackhartmann]

W) TXU DD
Rated a Watch
Reason for DD

Seeing high Value line and S&P rating and huge dividend.

Business

TXU Corp. engages in the generation, purchase, transmission, distribution and sale of electricity; the purchase, transmission, distribution and sale of natural gas; and energy marketing, energy services, telecommunications and other businesses. TXU Corp. is a multinational energy services holding company and one of the largest energy services companies in the world with more than $22 billion in revenue and $45 billion of assets. TXU Corp. has 30,000 megawatts of power generation and sells 270 terawatt hours of electricity and 2 trillion cubic feet of natural gas annually. TXU Corp. delivers or sells energy to approximately 11 million customers primarily in the United States (US), Europe and Australia. At December 31, 2000, TXU Corp. and its subsidiaries had 16,540 full-time employees.
TXU Electric is the largest subsidiary of TXU Corp. and one of the largest electric utilities in the US. TXU Electric operates 23 generating stations, 18 of them fueled by gas and oil, 4 by lignite, and 1 by nuclear fuel, and provides electricity service to 92 counties and 370 incorporated cities in Texas.

Competitors

Other Utilities

News

Horgan waxes energetic on energy
By Lisa Sanders, CBS.MarketWatch.com
Last Update: 1:27 PM ET Mar 14, 2001
DALLAS (CBS.MW) - VJ Horgan, TXU's president of energy trading, is absolutely energetic on the subject of power.
Horgan was hired in September to head the group as TXU positions itself for Texas' deregulation of retail electricity in January 2002. She is one of two women to have a position at the top level of management in the industry. Mirant (MIR: news, msgs, alerts) CEO Marce Fuller was once president of trading and marketing operations before she took over the helm of the company. Energy trading, as defined by TXU, is the means to identify, measure, and value a portfolio of assets, which can include buying and selling of different commodities, such as electricity and natural gas. It also entails managing contracts and obligations and assessing and managing risk. TXU Electric & Gas, a subsidiary of Dallas-based (TXU: news, msgs, alerts) , is Texas' largest investor-owned utility. In an interview with CBS.MarketWatch.com, Horgan expanded on the subject of energy trading, the problems in California, and how TXU will fare in a completely deregulated environment. A law deregulating Texas wholesale electricity was signed in 1995.
Q. CBS.MW: How does energy trading work?
A. Horgan: We're but one part of an overall successful strategy built around portfolio management. Our ownership of upstream assets as well as downstream assets represented by customer relationships and an extensive ability to aggregate these customer obligations is absolutely integral to the portfolio management model...While your upstream capabilities are focused on operating assets and having a model predicated on operational excellence, our downstream assets, again the end-use markets, are very much focused on...understanding how customers buy, what they want to buy, anticipating those needs and being in a position to solve them. Trading is the guy in the middle. We are very market focused and as we look at the factors that influence current markets but also forward markets, we are the eyes on the market that help assess in a given region where we want to position ourselves along that energy value chain.
Q. CBS.MW: If California's utilities had been in a position to hedge, could the energy crisis have been avoided?
A. Horgan: They certainly could have mitigated a lot more of the risk. When you can't hedge and you're entirely at the whim of market movements, and you have an obligation to serve...let's look at the structural implications of what they're also faced with. Those that had an obligation to serve the end-use customer load were forced to divest of their upstream assets. Back to the portfolio management model, you're being forced to operate with only half the equation. In addition, if you're long customers and you have an obligation to serve them, you're effectively short the market, and you can't do anything to mitigate that risk. Again, when you're forced or you choose to operate with only half of the portfolio management dimension, the propensity for bad things happening is much greater.
Q. CBS.MW: Do you sell power into California, and if not, why not?
A. Horgan: Currently we do not. We have some fairly extensive gas operations in California.
Q. CBS.MW: Did you foresee a problem in California?
A. Horgan: Yes with regard to California in terms of the leverage to the commodity.
Q. CBS.MW: What markets are you interested in?
A. Horgan: When we look outside of Texas to the markets that will provide the greatest opportunity for growth, we have undertaken an extensive regional assessment study that looks at fundamentals like supply in the region - what resources exist both from a generation perspective as well as fuel resources - load growth, transmission constraints, transportation constraints, environmental legislation or constraints, market and regulatory structure, and we assess from the perspective given the competencies we have in both operating upstream assets, aggregating customers in the downstream markets and our ability to develop and deliver our wholesale capabilities in the energy trading company. We assess what is the best market entry strategy in the regions we feel that have the dynamics that will enable us to not just establish what might be an ownership position in a particular asset or an aggregation of customers but over the long haul would enable us to establish the balance perspective across both upstream and downstream assets.
Q. CBS.MW: What is current status of the supply situation in the U.S.? Where there are constraints, how can they be overcome?
A. Horgan: There is no one U.S. market. When you look at the realities of how the individual sub-regions trade and how really reliability is determined in those regions, yes, there are markets that have extreme dislocations between supply and demand. The supply and demand can also be excess supply. Other markets with constraints traditionally have been in the mid-continent around the Illinois region; some into the mid Atlantic states, and some segments of New York have constraints. The Southwest, at this stage, has seen a reasonable amount of new construction in the past several years in large part because people were trying to overcome the difficulty of [locating] in California. We're probably okay in the Southwest. The solutions: you have a number of companies that have come out very strongly with a strategy of meeting that supply shortage.
Q. CBS.MW: If the vast majority of the new power plants being built in the U.S. are natural-gas fired, and natural gas has already been bid up two to three times what it was a year ago, does that suggest that once these plants come on line, prices for the electricity they generate will remain high?
A. Horgan: I think that depends on what the supply response is, how deep and how swift the supply responses are on the gas side. There are two aspects to that: how much natural gas really exists and the actual transportation capacity to get it to the market. Gas prices have been high before and generally have never been sustainable. Of course, we haven't had the level of demand as contemplated not only with the existing plants that have come on but also the ones that are in backlog. So, generally markets are responsive and if gas prices were going to be high because there was neither a swift nor a deep response from the gas supply side of the equation, then a natural response would be for people to start building coal plants.
Q. CBS.MW: Do you think it's necessary for the industry to pursue alternative energy sources like clean coal and liquefied natural gas?
A. Horgan: That's purely an economic answer. What you'll see is a technology response to the current state of price dislocation, and that gets them to how sustainable is that price. If prices are high for a year, they are certainly not going to cover the cost of some of the new technologies.
Q. CBS.MW: Your job description includes positioning TXU to participate in deregulation of the Texas electricity markets in 2002. What does that entail?
A. Horgan: The previously vertically integrated companies have to file plans for both the generation company and the retail company. There's a systems infrastructure requirement, there's the development of new processes, procedures and control around that, and maybe most importantly bringing an entire new level of skill into the organization, which will enable us to manage what will then be, effectively, an entire merchant portfolio. Trading brings to the portfolio management model a market focus, the analytical skills and capabilities to assess alternative investments, and part of the positioning anticipated there will (involve) rigorously evaluating our existing portfolio of assets, whether upstream or downstream. In transitioning and positioning the company, that means getting the appropriate skills in place to evaluate the risks, and up to and including how we want to change the composition of that portfolio as we enter the deregulated marketplace. We will be ready.
Q. CBS.MW: Do you see any of the same problems in California affecting Texas?
A. Horgan: Absolutely not. Our market structure is very different. Unlike California where demand greatly exceeded supply, we have a market that is generously supplied.
http://www2.marketwatch.com/news/yhoo/story.asp?source=blq/y...

2/1/01 CC Notes
- 11M customers globally,
- electricity volume up 11%, top 5 in NA
- gas volume up 40%, top 10 in NA
- overhauled merchant trading division
- 0.61 EPS in q4 vw. 1.24 in 99 This had 0.52 gain from primeco sales
- 3.43 EPS in 2000 up 8%
- Sold gas metering business for 31M gain
- Merchant trading revamped. Incurred a number severance costs. 27M charge
- US Electric perform, 158M in Netincome
- Added 11K customer in North Texas
- Q&A
- Look forward in strengthening balance sheet in 2001. Paying out dividends and targeting 55% debt. Not going to repurchase share.
- Will buy stock if it drops at the lower range.

Dallas, Aug. 31 (Bloomberg) -- TXU Corp. said the amount of electricity its Texas utility supplied to customers reached a record for a third time this year as a heat wave spurred the use of air conditioners.
TXU Electric & Gas, which serves the Dallas-Fort Worth area, said consumption peaked between 4 p.m. and 5 p.m. yesterday at 22,056 megawatts, or enough power to light more than 22 million U.S. homes. That broke the July 20 record by 14 megawatts. Temperatures at Dallas-Fort Worth International Airport reached 106 degrees Fahrenheit yesterday. It was the 38th day northern Texas has topped 100 degrees this summer and the 61st straight day without rain, the National Weather Service said. Its five-day forecast calls for more of the same.

DALLAS, March 6 /PRNewswire/ -- LayerOne, Inc., a global provider of layer one optical transport exchange facilities and services, today announced it has signed a master service agreement with TXU Communications to connect the company's extensive regional fiber network to LayerOne's optical transport exchange facilities. TXU Communications plans to take advantage of the cost- effective distribution technology within LayerOne's NEXUS Optical Distribution Exchanges(TM), and tap a ready pool of potential buyers for its wholesale bandwidth and dark fiber services. TXU Communications initially plans to deploy in LayerOne's Dallas Exchange, gaining immediate access to some of the country's largest fiber optic networks, with options to extend its network into any of LayerOne's fourteen additional facilities, including two additional Texas facilities currently under construction in Fort Worth and Houston.

Analysts and Other

We expect EPS to grow around 8% in 2001. This would follow a 7.5% rise in 2000 over 1999’s operating of $3.19. (Due to the different levels of shares outstanding, the reported EPS for the 1998 individual quarters do not add up to the full year EPS). TXU will continue to expand both its international business and its non-regulated domestic operations. It will seek growth in Europe through acquisitions, joint ventures and management service contracts. TXU intends to sell some of its generation plants in the U.K., since its energy trading operations do not require physical ownership of the plants. For the same reason, it is likely to sell or swap some of its generation plants in Texas. Having completed about $600 million of its $800 million share repurchase program, we do not see additional near-term repurchases. We expect free cash flow to be used to reduce the debt/equity ratio to 55% by end of 2001. We would continue to buy TXU stock. With a dividend yield of approximately 5.7%, and the shares trading at around 11 times our 2001 EPS estimate of $3.70, the stock remains attractive for both price appreciation and income. In 2000, after having dropped nearly 27% in the early part of the year, the shares rebounded about and finished the year up 24.6%. The stock had been hurt by the decline of power prices in the U.K and a PUCT order deferring consideration for 78% of the $1.65 billion regulatory asset securitization TXU requested. Texas legislation will allow TXU to completely recover its stranded costs and maintain existing rates until retail competition begins on January 1, 2002, at which time it will reduce its rates by 6% for a five year period. While this would reduce revenues by about $460 million, it would be more than offset by a $500 million increase from TXU’s U.S. energy operations.
Sources of power generation for TXU Electric in 1999 were: gas/oil, 34.3% (36.7% in 1998); lignite/coal, 38.5% (36.5%); nuclear, 16.4% (16.4%); and purchased power, 10.8% (10.4%).
2-22-00 S&P report

13-Feb-01 13:00 -- 14:00 ET
TXU Corp (TXU) 41.11 +0.31: Salomon Smth Brny initiates coverage with an OUTPERFORM and a $45 price target; believes TXU is selling at an unwarranted discount relative to Integrated Utility group due to investor confusion over TXU's growth strategy and various regulatory uncertainties; expects company to sell non-core businesses and focus on its global Energy Merchant franchise, which is not yet profitable in the U.S.; as company does so, the shares could re-value to near-parity with group.

Numbers

Revs 4435.0M to 4486.0m to 4776.0M to 4592.0 to 5834.0M
EPS 0.72a to 0.89a to 0.67 to 1.25 to 0.61 Feb01 per briefing
EPS est for 12/01 yr is 3.68, 2002 is 3.94
52-Week Low on 31-Mar-2000 $29.188
Recent Price $39.67
52-Week High on 26-Dec-2000 $45.25
Market Capitalization $10.2B
Shares Outstanding 258.1M
Float 255.5M
Annual Dividend (indicated) $2.40
Dividend Yield 6.05%
Price/Book (mrq) 1.37
Price/Earnings (ttm) 11.57
Price/Sales (ttm) 0.48
EBITDA (ttm) $3.69B
Debt/Equity (mrq) 2.75
Total Cash (mrq) $1.04B
As of 8-Feb-2001 Shares Short 4.68M Percent of Float 1.8%

Company cut dividend in 1995 and 1994.

Block trades of note
3/16/2001 9:32:00 AM $39.250, 298,500 shares, $11,716,125 sell
2001-03-15 16:01 $39.880, 254,300 shares, $10,141,484 between spread
2001-03-14 16:02 $39.100, 184,600 shares, $7,217,860 between spread
2001-03-14 12:52 $39.100, 106,000 shares, $4,144,600 buy
2001-03-14 10:12 $39.500, 151,400 shares, $5,980,300 sell
2001-03-06 15:30 $41.500 1,700,000shares, $70,550,002 between spread, monster trade

Internet Posts of Note

none

Insiders

Nothing of note

Chart

Falling with the Dow Utilities. May retest $36 level.

Links

www.txu.com

Summary

Dividend is attractive. I think EPG and DUK are better managed companies have better growth, but TXU is cheap and has that high dividend. I remember my folks buying four utilities in the bear market of the 1970s and getting a dividend check each month. TXU entering the merchant energy business. Tough to compete with EPG and ENE in the area.

Jack