UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                   Washington, D.C. 20549



                          FORM 10-K
                            ____

   [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

         FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                            - OR-
   [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934


COMMISSION        EXACT NAME OF REGISTRANT AS SPECIFIED IN   I.R.S. EMPLOYER
FILE NUMBER     ITS CHARTER; ADDRESS OF PRINCIPAL EXECUTIVE   IDENTIFICATION
                        OFFICES; AND TELEPHONE NUMBER              NO.
-----------     -------------------------------------------  ------------------
001 - 15709                 TXU EUROPE LIMITED                  98-0188080
                            The Adelphi
                            1-11 John Adam Street
                            London, England WC2N 6HT
                            011-44-207-879-8081

Securities registered pursuant to Section 12(b) of the Act:


                                                           Name of Each
Registrant                    Title of Each                Exchange on
                                  Class                  Which Registered
--------------------        -------------------         -------------------
TXU Europe Capital I         9 3/4% Trust Originated       New York Stock
                               Preferred Securities           Exchange


Securities registered pursuant to Section 12(g) of  the  Act:
None


Indicate by check mark whether the registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrants were required
to  file  such  reports), and (2) have been  subject  to  such
filing requirements for the past 90 days.   Yes  x     No ___

Indicate  by  check  mark if disclosure of  delinquent  filers
pursuant  to  Item  405  of Regulation S-K  is  not  contained
herein,  and  will  not  be contained,  to  the  best  of  the
registrant's  knowledge, in definitive  proxy  or  information
statements incorporated by reference in Part III of this  Form
10-K or any amendment to this Form 10-K. [x]

Aggregate market value of TXU Europe Limited Common Stock held
by non-affiliates:  None

Common  Stock  outstanding  at March  2, 2001:  2,455,705,299
shares, at US$1 par value and 100 deferred shares at pounds  1
par value

TXU EUROPE LIMITED MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTIONS (I) (1) (A) AND (B) OF FORM 10-K AND IS THEREFORE
FILING THIS REPORT WITH THE REDUCED DISCLOSURE FORMAT.

DOCUMENTS INCORPORATED BY REFERENCE:   NONE

<PAGE>
                       TABLE OF CONTENTS

                                                               Page

                              PART I

Item 1.   BUSINESS                                               1

     LEGAL ENTITIES
      Summary Corporate Structure                                1
      TXU Europe Limited                                         1
      TXU Europe Group plc                                       2
     INDUSTRY BACKGROUND                                         2
     STRATEGY FOR TXU EUROPE GROUP                               5
     OPERATING SEGMENTS                                          5
      Portfolio Trading and Power                                6
      Energy Retail                                             11
      Networks                                                  12
      Other                                                     15
     ENVIRONMENTAL MATTERS                                      16



Item 2.   PROPERTIES                                            18

Item 3.   LEGAL PROCEEDINGS                                     18

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   19


                             PART II

Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS                                   20

Item 6.   SELECTED FINANCIAL DATA                               20

Item  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS                   20


Item  7A. QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT
          MARKET RISK                                           20

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA           20

Item  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE                   20



                             PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT    21

Item 11.  EXECUTIVE COMPENSATION                                21

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND
          MANAGEMENT                                            21

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS        21


                             PART IV

Item  14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
           ON FORM 8-K                                          22


APPENDIX  A - Financial Information of TXU Europe Limited  and
              Subsidiaries

APPENDIX  B -  Exhibits

                               i

<PAGE>



                           PART I

  Item 1.  BUSINESS

                       LEGAL ENTITIES

                 SUMMARY CORPORATE STRUCTURE

                          TXU CORP.

  TXU  EUROPE LIMITED                 TXU Finance  (No.2) Holdings Inc.

       TXU Eastern Funding Company

       TXU Finance (No.2) Limited (10% owned by
                              TXU Finance (No.2) Holdings Inc.)

       TXU Europe Group plc (Predecessor Company)

               Eastern Electricity plc

               Eastern Natural Gas Limited

                    TXU Europe Power Limited

                    TXU Europe Energy Trading Limited

                         TXU Europe Energy Trading B.V.

                    Eastern Natural Gas (Retail) Limited

                         Eastern Energy Limited



                             TXU EUROPE LIMITED

       TXU   Europe  Limited  (TXU  Europe)  is  a  private  limited  company
incorporated  under the laws of England and Wales on February 5,  1998.   TXU
Europe  is  an  indirect  wholly-owned  subsidiary  of  TXU  Corp.,  a  Texas
corporation.   TXU Corp. is a multinational energy services  holding  company
that  is engaged 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, primarily in the United States (US), Europe and Australia.
TXU Europe is a holding company for TXU Corp.'s United Kingdom (UK) and other
European operations.

      Almost  all of TXU Europe's operating income is derived from,  and  its
consolidated assets are held by, TXU Europe Group plc (TXU Europe Group)  and
TXU  Europe  Group's  subsidiaries. TXU Europe owns 90%  of  the  outstanding
ordinary  shares  of  TXU  Finance  (No. 2)  Limited,   (TXU  Finance).   The
remaining  10% of TXU Finance's outstanding ordinary shares are  owned  by  a
wholly-owned  US subsidiary of TXU Corp.  The structure of TXU  Europe  Group
and  its  subsidiaries is currently being amended in connection with the  re-
organization of its constituent businesses.

      TXU  Eastern  Funding Company (Funding) is a private unlimited  company
incorporated  under  the  laws of England and Wales  and  is  a  wholly-owned
indirect  subsidiary of TXU Europe.  Funding was organized solely to  provide
funding for the operations of TXU Europe and its subsidiaries by issuing debt
securities and lending the proceeds to TXU Europe.

                                1

<PAGE>


                            TXU EUROPE GROUP plc

  TXU  Europe's major business operations are conducted through the following
subsidiaries of TXU Europe Group:

    TXU Europe Energy Trading Limited, or TXU Europe Energy Trading, which
    has as its business coordinating and managing for TXU Europe Group and for
    other parties the price and volume risks associated with generation, and
    electricity and gas retail businesses, and through its subsidiary, TXU
    Europe Energy Trading B.V., participates in energy merchant trading in
    Continental Europe;

    TXU  Europe  Power Limited, or TXU Europe Power, one of  the  largest
    generators of electricity in the UK;

    Eastern  Electricity plc, or Eastern Electricity, one of the  largest
    distributors and retailers of electricity in the UK, and Eastern  Energy
    Limited, which supplies electricity outside the authorized area served by
    Eastern Electricity and includes the supply business acquired from Norweb
    plc. TXU Europe, through Eastern Energy Limited, will act as Norweb plc's
    agent in meeting its obligations under the public electricity supply
    license until its customers can be formally transferred to TXU Europe
    following implementation of the Utilities Act, as defined herein; and

    Eastern Natural Gas (Retail) Limited, or Eastern Natural Gas, one of the
    largest retail suppliers of natural gas in the UK.

  TXU  Europe Group sells electricity and natural gas principally  under  the
brand  names  of  Eastern Energy and Norweb Energi.  The  operations  of  TXU
Europe  Energy Trading and TXU Europe Power are treated by TXU Europe as  the
Portfolio Trading and Power segment for reporting purposes.  The electric and
gas  supply  business is treated as the Energy Retail segment  for  reporting
purposes.  Energy Retail and Portfolio Trading and Power comprise TXU  Europe
Group's energy business. The distribution business is treated as the Networks
segment for reporting purposes.

    All  markets  in the UK are now open to competition, where customers  are
free to choose their energy providers.  The competition in the UK and further
deregulation in continental European markets allows for creation of a  global
portfolio  management  business model.  Under this  model,  TXU  Europe  will
manage a portfolio of generation assets, contracts and  customer
relationships  as a single unified energy business.  To that  end,  in  early
2001,  TXU  Europe  will undertake an internal reorganization  to  reflect  a
greater  integration of the energy business.  The Energy Retail and Portfolio
Trading and Power segments for TXU Europe will be combined operationally  and
organizationally  into  one  business  managed  similarly   by   geographical
locations.



                             INDUSTRY BACKGROUND

THE ELECTRICITY INDUSTRY IN ENGLAND AND WALES

  Traditionally,  the  electric industry in the UK,  including  distribution,
transmission  and  generation, has been regulated.   Throughout  England  and
Wales,  electricity  power  stations,  together  with  the  transmission  and
distribution  systems, constitute a single integrated network.  Privatization
of  the  UK  electricity industry has opened the market to new  participants.
Each   participant  must  be  licensed  to  generate,  transmit   or   supply
electricity.  Almost all electricity generated in England and Wales  must  be
sold  to  and  purchased from the wholesale trading market  for  electricity,
commonly  known as the Pool. The electricity generated at the power  stations
is  delivered through the high voltage transmission system owned and operated
by  The  National  Grid Company (National Grid).  It is then transformed  for
delivery on to the local distribution networks owned and operated by  holders
of  public electricity supply licenses like Eastern Electricity.  Prices  for
electricity  are  set  by  the  Pool for each half  hour  based  on  bids  of
generators and a complex set of calculations that matches supply and demand.

                                2

<PAGE>
The Pool

  The  Pool  was  established  in 1990 for bulk  trading  of  electricity  in
England  and  Wales between generators and suppliers.  The Pool reflects  two
principal   characteristics  of  the  physical  generation  and   supply   of
electricity from a particular generator to a particular supplier.  First,  it
is  not  possible  to  trace  electricity from a particular  generator  to  a
particular  supplier.  Second, it is not practicable to store electricity  in
significant quantities.  These characteristics create the need for a constant
matching  of  supply  and  demand. The Pool  does  not  itself  buy  or  sell
electricity,  but  rather is a mechanism to facilitate  transactions  between
generators and suppliers.

  All  electricity  generated in England and Wales,  other  than  electricity
generated  by  small generators connected directly to the local  distribution
networks  rather  than National Grid, must be sold to  the  Pool.   In  turn,
electricity suppliers generally must buy electricity from the Pool for resale
to  their  customers.   Even groups which are both  generators  and  licensed
suppliers, like TXU Europe Group, in most circumstances, must act through the
Pool  to  sell  all  the  electricity  they  generate  and  to  purchase  all
electricity  they sell to customers. The Pool will be eliminated  with  final
implementation of the New Energy Trading Agreements (see Industry  Regulation
below.)

GAS INDUSTRY

  The  gas  industry  in  the UK has been privatized  and  competition  among
suppliers is encouraged by deregulation of the supply of gas, first to larger
customers  and,  more  recently, to smaller customers  including  residential
users.   Most of the gas transmission and distribution network in the  UK  is
now  owned  by Lattice plc, which is required to provide fair access  to  its
network to all shippers of gas.

INDUSTRY REGULATION

GENERAL

  The  electricity and gas industry in the UK is subject to regulation under,
among  other  things,  the Electricity Act  (as amended  principally  by  the
Competition and Service (Utilities) Act 1992 and the Utilities Act 2000), the
Gas  Act  1986  (as  amended  principally  by  the  Competition  and  Service
(Utilities) Act 1992, the Gas Act 1995 and the Utilities Act 2000) and UK and
European  Union (EU) environmental legislation described below.   TXU  Europe
Group has all of the necessary licenses, franchises and certificates required
to enable it to conduct its businesses.

  The  electricity  and  gas  markets  in  the  UK  are  now  fully  open  to
competition, although there are certain price restrictions on allowable rates
that  can  be  charged and other price restrictions for the distribution  and
supply  business.  In addition, the operating activities of these  industries
are still subject to numerous governmental regulations.

  To  be  able  to supply electricity, a supplier must either have  a  second
tier  supply  license issued under the Electricity Act 1989 of Great  Britain
(Electricity  Act)  or  hold  a public electricity  supply  license  for  the
authorized area where its customers are located.  The former regional  supply
monopolies  or  franchises of the twelve regional electricity companies,  are
required,   under  their  public  electricity  supply  licenses,  to   supply
electricity to customers in their designated service areas.  A price  control
formula  set  out  in  the  supplier's  license  limits  prices  charged   to
residential  customers and small businesses in the designated service  areas.
A  formula determines the maximum prices which any public electricity  supply
license  holder  is  permitted to charge.  A separate price  control  formula
determines the maximum distribution revenue which a public electricity supply
license  holder  may  earn from charges made to its  own  electricity  supply
business and other electricity suppliers for use of its distribution network.

NEW ELECTRICITY TRADING ARRANGEMENTS (NETA)

  The  implementation  of NETA is now scheduled for the end  of  March  2001.
NETA  will  provide those wishing to buy and sell electricity the freedom  to
enter  into directly negotiated contracts instead of having to trade  through
the  Pool.   It is expected that under the new arrangements bulk  electricity
will  be  traded on one or more exchanges and through a variety of  bilateral
and multilateral contracts and that market participants will include not only
generators  and  suppliers  but also traders with  physical  positions,  i.e.
energy wholesalers; accordingly, NETA implementation will eliminate the Pool.

                                3

<PAGE>
  The new arrangements provide mechanisms for near real-time  clearing  and
settlement of differences between contractual and physical positions of those
buying,  selling, producing and consuming electricity.  A balancing mechanism
will  enable  the  system  operator,  National  Grid,  to  change  levels  of
generation  and  demand  to  near real-time; and a  mechanism  for  imbalance
settlement  will  provide  for the settling of the  differences  between  net
physical  and  net  contractual  positions of  parties.   Electricity  supply
businesses  have incurred significant costs preparing to operate under  NETA,
while the financial impact on distributors has been minimal.  Although the UK
government  proposes that such costs will ultimately be borne  by  customers,
the Office of Gas and Electricity Markets (OFGEM) has not allowed recovery of
such  costs  in the price controls which became effective on April  1,  2000.
TXU  Europe's ability to manage its purchase price risk depends, in part,  on
the  continuing  availability of properly priced risk  management  mechanisms
such  as  contracts for differences and electricity forward  agreements.   No
assurance can be given that an adequate, transparent market for such products
will in fact be available in the future (including NETA).

UTILITIES ACT

  The  Utilities  Act  2000 (Utilities Act) received Royal Assent  (necessary
for  enactment) on July 28, 2000 and will become effective in April 2001. The
goals  of  the Utilities Act are to place consumer interests at the  core  of
regulation  and to harmonize gas and electricity regulation.   The  Utilities
Act makes changes to the electricity and gas licensing framework, but for the
most part license obligations will be carried over as appropriate and will be
largely unchanged from those in present licenses. In addition, the regulators
of  gas  and electricity markets are combined into a single regulatory  body,
the Gas and Electricity Markets Authority (the Authority), which consists  of
a  Chairman  and Members appointed by the Secretary of State  for  Trade  and
Industry, and is supported by OFGEM.

License Arrangements

  The  distribution  business will for the first  time  become  a  separately
licensable  activity. Until now, certain obligations relating to distribution
activities have been included in Eastern Electricity's supply license and  in
the licenses of other electricity suppliers who operate distribution systems;
but  organizations that operate electricity distribution systems without also
being  suppliers have not been required to obtain a license to  do  so.  Each
license  will  be in the form of references to a set of standard  conditions,
plus  any  special  conditions particular to that license. This  follows  the
present  licensing  model for gas.  The Secretary  of  State  for  Trade  and
Industry will in due course determine the set of standard conditions relating
to the electricity distribution business.

  Supply  activities  have  been carried out under  two  different  types  of
license.   A public electricity supply license allows supply in the franchise
areas  of  the  former  nationalized  Area  Electricity  Boards,  which  were
privatized  in 1990.  New suppliers entering the market together with  public
electricity suppliers wishing to supply outside their franchise areas  do  so
using  a  Second Tier Supply License.  The Utilities Act allows  for  only  a
single  type  of  Supply  license also using a  set  of  standard  conditions
together with relevant special conditions.

  The  Secretary of State for Trade and Industry will determine a revised set
of  Standard  Conditions  relating  to  gas.  The  activity  of  "Public  Gas
Transportation"  will be renamed "Gas Transportation". Gas Transporters  will
no longer have exclusive rights over particular geographical areas.

Other Provisions of the Utilities Act

  The Utilities Act made provision for a number of other things including:
 -    The  transfer of the supply and distribution businesses of the  Public
      Electricity  Suppliers  to  the  newly licensed  entities of supply and
      distribution, currently scheduled to take place by mid 2001;
 -    The implementation of NETA;
 -    The  amalgamation  of the gas and electricity consumer  representation
      bodies into a new body, the Gas and Electricity Consumers Council (known
      as  "energywatch");
 -    The introduction of an obligation for electricity suppliers to obtain a
      portion of energy supply from renewable sources to be determined after
      due consultation by the Secretary of State for Trade and Industry;
 -    The  introduction of an obligation for the Authority in  carrying  out
      regulatory duties to take due account of social and environmental
      guidance issued by the Secretary of State for Trade and Industry; and
 -    New powers of license enforcement.

                                4

<PAGE>
  The  implementation of the Utilities Act will make  possible  the  formal
transfer of the retail customers acquired from Norweb plc to TXU Europe Group
and its subsidiaries.


                        STRATEGY FOR TXU EUROPE GROUP

  TXU  Europe  Group began as a regional electricity company,  operating  the
largest  electric networks business and one of the largest supply  businesses
in  the UK.  As the UK energy market has become increasingly competitive, and
as   the  energy  markets  in  continental  Europe  have  begun  to  open  to
competition,  TXU Europe Group has been a pioneer in the development  of  the
flexible  energy  portfolio concept. The variety of  physical  and  financial
resources  and  customers  in  TXU Europe Group's  energy  business  provides
flexibility  to respond more quickly to structural changes in energy  markets
in the UK and in continental Europe.

  The  portfolio is structured to provide maximum flexibility over  the  long
term to enable TXU Europe Group to continue delivering optimum value.  It  is
designed  to  meet the hedging needs of TXU Europe Group's retail operations,
but  it  is continually growing, re-shaping and re-forming to respond to  the
ever-changing  market conditions and priorities for risk capital  allocation.
Indeed, TXU Europe Group's entire portfolio, including its generation assets,
contractual  links  and  customer relationships,  is  managed  to  take  full
advantage of evolving short-term market conditions and to manage the risks of
longer-term  movements in value within the components of the  energy  market.
The  portfolio  management  must  anticipate such  value  movements,  through
accurate  market  forecasting,  and then take  commercial  advantage  of  the
changes.

  The  performance  of  the  portfolio is consolidated  through  a  financial
portfolio  of  cash  flow and risk.  Because of TXU Europe  Group's  embedded
flexibility within its diversified and integrated single energy portfolio, it
is  able not only to reduce the costs of risk management but also to identify
and  extract  elements of value that could not be extracted  from  individual
components on their own.

  TXU  Europe Group's strategy for the UK energy business is to increase  its
market  share in the retail sale of gas and electricity by strengthening  its
existing  positions  in  those  markets (an  example  is  the  Norweb  Energi
acquisition).   TXU  Europe  Group believes  that  substantial  economic  and
marketing benefits are derived from operating its natural gas and electricity
retailing   business   as  a  single  unit.   Competitive   markets   provide
opportunities  for  TXU Europe Group to expand its retail  base  through  its
marketing  efforts  and a focus on service to customers.   Providing  similar
development  and  management  of  portfolios  to  other  third  party  energy
providers  gives  TXU Europe Group additional opportunities  to  develop  its
customer  base.  TXU  Europe Group will also continue to improve  operational
efficiency in its businesses.

  TXU  Europe Group also plans additional growth in continental Europe.   TXU
Europe  Group  expects  competition  to increase  in  European  markets.   As
opportunities arise, TXU Europe Group intends to expand its current  European
presence  by  developing its European energy business.  As  appropriate,  TXU
Europe Group aims to establish positions through interests in physical assets
or  through  contracts and trading.  It expects to develop  distribution  and
retail  customer  bases  through direct marketing  and  alliances,  or  joint
ventures,  with businesses having existing customer bases.  These steps  will
enable  TXU  Europe Group to operate profitably in these markets by  applying
skills  learned  in the UK market, in partnership with local  management  and
fellow  stakeholders, and additionally by taking advantage of price, weather,
the  timing of demands on the system or other differentials between connected
European markets, as it does in the UK.


                             OPERATING SEGMENTS

GENERAL

  Almost  all  of  TXU  Europe's  operating  income  is  derived  from,   and
consolidated  assets  are held by, TXU Europe Group and  TXU  Europe  Group's
subsidiaries.

  The  business  and  operations of TXU Europe  Group  and  its  subsidiaries
consist  of two main businesses, energy and networks, which are divided  into
three principal operating segments, as follows:

  ENERGY  - The Energy business manages TXU Europe's integrated portfolio  of
customers, assets and contracts in the UK and continental Europe.  Operations
in   the  UK  are  conducted  through  wholly-owned  subsidiaries.   European
activities  are conducted through both wholly-owned subsidiaries  and  joint-

                                5

<PAGE>
venture operations.  Through its portfolio management and trading operations,
TXU  Europe  seeks to allocate risk capital so as to maximize returns  across
European markets.  As a consequence, the composition of assets and operations
in  each  market  within the portfolio changes from time to  time.   The  two
operating segments of the Energy business are:

  (i)  the  PORTFOLIO  TRADING AND POWER business (formerly known  as  energy
       management and generation), which manages a portfolio of generation
       assets and contracts throughout Europe; and

  (ii) the  ENERGY  RETAIL business, which as of December 31, 2000,  supplies
       electricity and gas to approximately 5.5 million residential, industrial
       and commercial customers in the UK, including those arising from the
       Norweb Energi acquisition (described below).

  NETWORKS -

  The third  operating segment is the NETWORKS business which owns,  manages
and,  through  its networks management joint venture, 24seven,  operates  the
electricity distribution system in the UK.

  UK  energy  operations  are  carried out  principally  through  TXU  Europe
Group's  subsidiaries, Eastern Electricity plc (which also owns the  networks
electricity  distribution system), Eastern Energy Limited  (Eastern  Energy),
Eastern   Natural  Gas  Retail  Limited,  TXU  Europe  Power  Ltd  (and   its
subsidiaries) and TXU Europe Energy Trading Ltd.

 Continental European energy operations are carried out as follows:

 (i)  Portfolio trading in central European markets through TXU Europe Energy
      Trading BV (and its subsidiaries), primarily in Germany,the Netherlands,
      Switzerland and Spain; and

 (ii) Nordic  operations through TXU Nordic Energy Oy (a joint venture  with
      Pohjolan Voima Oy (PVO), Finland's second largest electricity generator)
      which trades energy on Nordic markets, has access to hydro generation at
      Svartisen and Kobbelv and participates in distribution and retail
      markets through joint ventures, especially Savon Voima Oyj (SVO).

  European  operations were further expanded when Stadtwerke  Kiel  AG  (Kiel
AG) became a subsidiary of the group on January 8, 2001, as described below.

  Financial  information  required hereunder is  set  forth  in  Note  18  to
Consolidated Financial Statements included in Appendix A to this report.

                     PORTFOLIO TRADING AND POWER SEGMENT


PORTFOLIO MANAGEMENT/ENERGY TRADING

  Typically, holders of public electricity supply licenses issued  under  the
Electricity  Act  in  connection  with  supply  and  distribution  within  an
authorized area in the UK are exposed to risk, as they supply electricity  to
their  customers  at  stable  prices but have  to  purchase  almost  all  the
electricity necessary to supply those customers from the Pool at prices  that
are constantly changing.  The ownership of generating assets reduces the risk
associated  with  such  price  volatility  and  provides  a  high  level   of
flexibility that promotes portfolio optimization

  TXU  Europe  Energy  Trading  manages  TXU  Europe  Group's  activities  in
managing  risk.   It  provides support to TXU Europe  Group's  energy  retail
activities,  taking  into  account its energy purchases  and  sales  and  its
contract  portfolios,  including TXU Europe  Group's  generating  assets  and
natural  gas  production interests.  TXU Europe Energy Trading is responsible
for  setting  the level of bids into the Pool for the output of each  of  TXU
Europe Group's generating stations, other than Barking and the combined  heat
and  power plants.  TXU Europe Energy Trading uses this method to co-ordinate
the  operation  of  TXU Europe Group's generating stations  with  TXU  Europe
Group's  fuel  contract  position and its retail and wholesale  energy  sales
portfolios  to  TXU Europe Group's best advantage. It also  co-ordinates  the
operation   of   TXU   Europe  Group's  generating  stations,   taking   into
consideration  the relative prices in the energy markets.  TXU Europe  Energy

                                6

<PAGE>
Trading  also  earns revenue by providing risk management services  to  other
energy retailers and generators to assist in managing their Pool/market price
risk.

  TXU Europe Energy Trading manages TXU Europe Group's financial exposure  to
fluctuations in electricity prices by:

  -    Managing its portfolio of contracts for differences;
  -    Bidding both price and volume for TXU Europe Group's generation output,
       other than for the Barking plant and the combined heat and power plants,
       into the Pool for each half hour of the day; and
  -    Deciding with the electricity retailing division of TXU Europe Group on
       the volume and pricing of sales in the competitive and ex-franchise
       markets.

  The  overall  electricity  position for  each  half  hour  of  the  day  is
monitored   by  TXU  Europe  Energy  Trading  with  the  goal  of  optimizing
electricity  purchases  and sales positions through  the  use  of  generation
facilities,  long  and  short-term  retail sales  contracts  and  appropriate
financial  instruments.  The overall gas position is monitored in  a  similar
way  with  additional opportunities presented through the operation  of  gas-
fired  power  stations,  storage  facilities  and  the  use  of  gas  assets.
Together,  the overall electricity and gas positions are managed by reference
to  risk exposure limits that are monitored by a risk management team  within
TXU  Europe  Group.   The  risk management team  verifies  that  the  trading
instruments employed have been approved for use by TXU Europe Energy  Trading
and  carries  out credit checks on current and proposed counterparties.   The
risk  management  team also continuously monitors TXU Europe  Energy  Trading
value at risk and ensures this is kept within set limits.  TXU Europe Group's
ability to manage that risk in the future will depend, in part, on the  terms
of  its  supply contracts, the continuation of an adequate market for hedging
instruments and the performance of its generating and gas assets.

  To  offset  some of the exposures within its overall natural gas portfolio,
which also includes a range of wholesale and retail customers, including  TXU
Europe  Group's  own  power stations, TXU Europe Group  has  entered  into  a
variety  of  longer term gas purchase contracts.  At December 31,  2000,  the
commitments  under  long-term purchase contracts  amounted  to  an  estimated
pounds  633 million, covering periods up to 8 years.  Estimated sales
commitments, including  estimated  power station usage, at the same date
amounted to approximately pounds 3 billion, covering periods up to 8 years.

  TXU  Europe Energy Trading also purchases coal, oil and natural gas for TXU
Europe  Group's  UK  power stations.  At December 31, 2000,  TXU  Europe  had
equity  interests in four natural gas-producing fields in the North  Sea.  On
February  1, 2001, TXU Europe sold its interests in its North Sea gas  assets
for  approximately pounds 138 million as part of its continuing review of its
positions in its energy portfolio.

Continental Europe

  In  September 1999, the energy management business established an office in
Geneva,  Switzerland,  which  co-ordinates  European  energy  management  and
development  projects.  In  its first full year  of  operation,  the  Central
European operations traded 157 Terrawatt hours (TWh) equivalent of power  and
gas in 2000 compared with 5 TWh equivalent in 1999.

  The   energy  management  business  also  trades  on  the  Nord  Pool,  the
electricity trading market in Scandinavia, and has access to up to 139 MW  of
hydro  output  in  Norway for 53 years, for which TXU Europe  Group  paid  an
upfront fee of up to pounds 151 million. Nordic operations (which are carried
out  primarily in the countries of Finland, Norway  and  Sweden)
had power trades of 156 TWh in 2000 compared with 37 TWh in 1999.

    In  December 1999, TXU Europe announced it would import electricity  from
Russia as part of an arrangement between PVO and the Russian national utility
RAO  UES (UES).  The portion of electricity allocated to TXU Europe under the
arrangement  will  be supplied to TXU Nordic Energy.  TXU  Nordic  Energy  is
entitled to 190 MW of the 400MW that will be imported by PVO from UES.  Under
the  arrangement, which began January 1, 2001 and lasts until 2004, UES  will
sell 667 million kilowatt hours (kWh) to PVO in the first year and up to 2.67
billion  kWh each year after 2001.  The electricity will be supplied  through
an electricity complex in Vyborg, a city on the Russian-Finnish border.

                                7

<PAGE>
  On January  8, 2001, TXU Europe completed the acquisition of 51%  of  Kiel
AG,  a  German  municipal utility, for approximately pounds 145 million.  The
city government of Kiel, the state capital, will retain the remaining 49%  of
the  utility, which has approximately 250,000 gas and electricity  customers,
175  megawatts of power generation and 2.7 billion cubic feet of gas  storage
capacity.

  In  November 2000, TXU Europe sold its 50 per cent interest in Elbolaget i
Norden, a Swedish electricity supplier, to the owner of the remaining 50  per
cent for approximately pounds 12.5 million.

REGULATORY MATTERS

  TXU Europe Energy Trading is permitted by the Financial Services Authority
under the Financial Services Act 1986 to deal in contracts for differences,
including futures and options, for both trading and non-trading or hedging
purposes in the UK.


TXU EUROPE POWER

  TXU  Europe  Power is one of the largest generators of electricity  in  the
UK.   Its  share of total UK generating capacity registered at  December  31,
2000,  is approximately 9.4%.  It currently owns, operates or has an interest
in ten power stations in the UK.


UK GENERATION FACILITIES

  TXU  Europe Group's current portfolio of power stations is predominately  a
mix  of  combined cycle gas turbine and coal-fired stations.   It  represents
both  plants which run throughout most of the year and plants which run  only
during  periods  of  high  demand.  TXU Europe  Group's  portfolio  of  power
stations provides flexibility in managing the price and volume risks  of  its
energy  contracts  and  has enabled TXU Europe Group to  diversify  its  fuel
supply risk.

  Information on TXU Europe Group's interests in power stations in the UK  is
set  out  in the following table.  In all cases installed generating capacity
is equal to registered generating capacity except for Peterborough and King's
Lynn,  which  have registered generating capacities of 405  MW  and  380  MW,
respectively, but installed generating capacities, as shown below, of 360  MW
and 340 MW, respectively.

<TABLE>
<CAPTION>
                                        Installed          Date of
                                         Capacity          earliest
Plant            Type                       MW          commissioning
-------------   ------------------      -----------     --------------
<S>              <C>                       <C>               <C>
West Burton      Coal-fired                2,012             1967
Rugeley B        Coal-fired                1,046             1972
Drakelow C       Coal-fired                  976             1965
Ironbridge       Coal-fired                  970             1970
High Marnham     Coal-fired                  945             1959
Peterborough     Combined cycle gas          360             1993
                  turbine
King's Lynn      Combined cycle gas          340             1997
                  turbine
Barking          Combined cycle gas          135(1)          1995
                  turbine
London-          Combined heat and            31             1992
Citigen           power
Grimsby-         Combined heat and            15             1995
MIC(2)            power
                                          -------
Total                                      6,830
                                          =======
<FN>
(1)  Represents TXU Europe Group's approximately 13.5% interest in a 1,000 MW
     plant.
(2)  Located on the property of a customer.

</FN>
</TABLE>

     TXU Europe Group's strategy in the UK market is to reposition its energy
portfolio  through  retail growth, long term wholesale sales  and,  possibly,
physical  plant  disposal.  TXU Europe Group continues to review  its  energy
portfolio within the UK.  TXU Europe Group has also announced that  it  would
seek  bids for its UK power assets, in order to evaluate whether their  value
would be maximized through retention or disposal of these assets.  There  has
been  no indication of an impairment of these assets. No decisions have  been
made as to whether disposals will actually take place.


                                8

<PAGE>
    West  Burton,  Rugeley B and Ironbridge. In June 1996, TXU  Europe  Group
assumed  operational and commercial control, through a combination  of  lease
and outright purchase from National Power, of all of the assets and a portion
of  the  liabilities  of  the West Burton, Rugeley  B  and  Ironbridge  power
stations.   As  of December 31, 2000, TXU Europe Group held a  99-year  lease
over  the land, buildings and plant at each of those power stations  and  has
the  right  to  purchase the freehold land after 50 years.  During  the  year
ended  December  31,  2000, TXU Europe Group reached an agreement  to  prepay
(effective January 2001), in fixed amounts, future charges linked  to  output

levels from these stations that previously had been payable over periods  to
March  2003.  In addition, an option was granted to TXU Europe Group to bring
forward the right to purchase the freehold land, previously exercisable after
50  years.  TXU Europe Group exercised the option to purchase the freehold in
January  2001.   At  this time, remaining outstanding  fixed  lease  payments
became  financial  obligations to a third party and will  be  settled  during
2001.  The National Power leases have been accounted for as capital leases.

      Drakelow  C  and  High Marnham. TXU Europe Group has leased  the  land,
buildings  and  plant at the Drakelow C and High Marnham power stations  from
PowerGen  for 99 years, under agreements entered into in July 1996.  PowerGen
is responsible for decommissioning costs if TXU Europe Group decides to close
these  stations during the term of the leases.  The payments,  together  with
interest, are being made in instalments, over eight years beginning in  1996.
Further output-related payments of approximately pounds 6 per MWh, indexed to
inflation, were payable, under the original lease, to PowerGen for the  first
five  years  of  operation by TXU Europe Group. As a  condition  for  the  UK
Secretary  of State for Trade and Industry allowing PowerGen to acquire  East
Midlands  Electricity  plc,  the  output-related  elements  of  these   lease
arrangements  were  terminated  15  months early.   Therefore  output-related
payments to PowerGen ended on March 31, 2000.

     Nedalo.  TXU Europe Power also owns Nedalo BV, a leading manufacturer of
small  electrical  combined  heat and power  plants,  which  are  those  with
generation capacity of less than 1.5 MW, in Europe, and as of March 1,  2000,
all of Nedalo (UK) Limited, the largest supplier of small electrical combined
heat and power plants in the UK.


NON-UK GENERATION FACILITIES

  Czech  Republic.  TXU Europe Group has an interest of approximately 84%  in
Teplarny  Brno, a district heating and generation company based in Brno,  the
second  largest city in the Czech Republic. Teplarny Brno owns oil  and  gas-
fired  plants that are capable of generating approximately 1,000 MW of energy
in  the  form of steam and hot water, which is sold principally to industrial
and  residential customers. Teplarny Brno has further generation capacity  of
approximately  192 MW of electricity and 86 MW of heat. It also  owns  a  169
kilometer pipeline network for distributing heat to customers' premises.

           Poland.  TXU  Europe  Group has a 49% interest  in  Zamosc  Energy
Company,  a  joint  venture  with the Polish regional  distribution  company,
Zamejska  Korporacja Energetyczna SA, which was established to develop  power
plants  in  southeast Poland.  The company did not proceed with proposals  to
develop a 125 MW combined cycle gas turbine at Jaroslaw.

  Finland.   TXU Europe Group owns 81% of a joint venture company called  TXU
Nordic  Energy  Oy, the remaining 19% being held by certain  shareholders  of
PVO,  Finland's second largest electricity generator.  TXU Nordic  Energy  in
entitled  to the output from approximately 584 MW of PVO's thermal generating
capacity  and  a wholesale trading business formerly owned by the  industrial
shareholders of PVO. TXU Europe Group also owns approximately 40% of  SVO,  a
regional electricity distributor in Finland.

  Germany.  In  January 2001, TXU Europe acquired 51% of Kiel AG,  which  has
175 MW of generation capacity.

OTHER PROJECTS

  In  December 1998, TXU Europe Group received government consent to build  a
215  MW  combined heat and power plant to provide heat and power  to  Shotton
Paper  on  Deeside.  The power station is being built  by  ABB  Alsthom  with
completion due in the third quarter of 2001.

  In  1999,  TXU  Europe  Group received government  consent  to  modify  the
Drakelow  and  Rugeley power stations to enable those power  stations  to  be
fueled  by gas in addition to coal, or by a combination of gas and coal.  TXU


                                9

<PAGE>
Europe Group has not yet proceeded with the modifications, principally due to
a  number  of  restrictive operational conditions, which will be reviewed  on
implementation of NETA.

  The  UK  government  imposes  an obligation  on  electricity  suppliers  to
purchase a portion of their requirements from renewable energy sources  under
the  non-fossil fuel obligation levy plan. Renewable energy sources are those
that  are not currently consumed faster than they are replenished.  Renewable

energy  sources include solar and wind power.  In April 1999, a one  MW  wind
turbine  in Northern Ireland had successfully completed tests and  had  begun
generating  electricity.   Subsequently, another  1.3  MW  wind  turbine  has
entered operation in Orkney, together with a 0.4 MW generator in North  Wales
that  uses  the flow of river water for power. TXU Europe Group is  currently
seeking  approval  to build a total of approximately 75 MW  of  wind  energy,
hydro  and  biomass  generation facilities.  In addition,  TXU  Europe  Group
recently  announced a joint venture with Anglian Water to construct a  number
of  generating  stations which will process almost half  of  Anglian  Water's
sewage  production;  the  prototype  plant  is  rated  at  10MW.   Additional
opportunities  for  renewable energy projects including the  gasification  of
municipal solid waste are also being considered.

COMPETITION IN GENERATION

  TXU  Europe Group's mix of generating plants enables it to operate  in  the
sectors  of the market for both plants that run throughout most of  the  year
and  plants  that run only during periods of high demand, and to  spread  its
fuel risks.

  The  UK  government initiated a program of reform in the electricity market
to  stimulate  competition.  The program involved reform of  the  electricity
trading  arrangements  in England and Wales; seeking practical  opportunities
for  divestment of assets by major coal-fired generators; moving forward with
competition  in electricity supply for all customers; separating  supply  and
distribution  in  electricity  markets;  revising  policy  relating  to   the
construction of new gas-fired generation facilities; and continuing to  press
for open energy markets in Europe.

  Several of the reforms have progressed significantly, for example NETA  and
business  separation,  although  all  are  currently  ongoing.  In  addition,
construction  of  new  gas-fired generating facilities, should  this  happen,
would be likely to increase competition in the generation market.  At current
gas  prices however, much new gas plant is unlikely to be built and  existing
plant  is  running  at reduced levels. TXU Europe Group  cannot  predict  the
impact these reforms will ultimately have its competitive position or on  its
financial position, results of operation or cash flows.

REGULATORY MATTERS

  Unless  covered  by  an exemption, all electricity generators  operating  a
power  station  in  the  UK  are required to have generation  licenses.   The
conditions  presently attached to generation licenses in  England  and  Wales
require  the  holder, among other things, to be a member of the Pool  and  to
submit  the output of the station's generating units to the Pool for  central
dispatch.    Following  the  implementation  of  the  Utilities  Act,   these
conditions will be modified to require compliance with the new Balancing  and
Settlement Code and to require co-operation with the transition to  NETA.  In
addition,  the restriction on the amount of generation capacity that  can  be
owned  or  operated by the successor companies to the old public  electricity
supply  license  holders will be removed. Failure to comply  with  a  license
condition  may  subject  the licensee to a variety  of  sanctions,  including
enforcement action by OFGEM through fines, and, where enforcement  action  is
not complied with, license revocation.

  In  December 1999, following extensive consultation with the industry,  the
Director  General  of Electricity Supply (DGES) published new  proposals  for
generation  licenses in order to promote fair competition in  the  generation
and  trading  of electricity. The proposals sought to ensure that  generators
with  positions of significant market power, deemed able to exert  an  upward
influence  on  prices in the Pool, should ensure that their prices  reflected
their  costs and that they did not take unfair advantage of any imperfections
in the operation of the Pool. TXU Europe Group played an active part in these
discussions and accepted the DGES's proposals on February 7, 2000, subject to
an  assurance from OFGEM that this condition in generating licenses would  be
removed  if  another  generator  successfully  appealed  the  matter  to  the
Competition  Commission.  Following an eight month inquiry,  the  Competition
Commission  concluded  in  December 2000 that the  condition  should  not  be
included  in  the  licenses  of AES and British  Energy  and  OFGEM  has  now
published  proposals to remove it from the licenses of TXU Europe  Group  and
four other generators. It is expected that this process will be completed  in
March 2001.

                                10

<PAGE>

                            ENERGY RETAIL SEGMENT

  TXU  Europe Group operates its electricity and gas retailing operations  as
a single energy business. The retail business is charged a regulated price by
transmission  and distribution companies, including Eastern Electricity,  for
the physical delivery of electricity.

  On  August  3,  2000,  TXU  Europe Group purchased United  Utilities  plc's
retail energy supply business, Norweb Energi (a division of Norweb plc).  The
agreement for the purchase of Norweb Energi included the eventual transfer of
the  current  Norweb  plc  public electricity supply  license-area  customers
(franchise or "in area" customers) and the transfer of Norweb plc's  interest
in  the  power  purchase agreements to TXU Europe Group.   TXU  Europe  Group
expects contracts with Norweb plc public electricity supply customers  to  be
in  place  under the Utilities Bill in early 2001.  Meanwhile,  Norweb  plc's
economic  interest  in the franchise customers and power purchase  agreements
are  effectively  passed  to  Eastern Energy  through  an  agency  agreement.
Eastern  Energy  acts  as Norweb plc's agent in meeting all  its  obligations
under  its public electricity supply license as they relate to the supply  of
electricity.   All  of  Norweb plc's "out-of-area" electricity  and  all  gas
customers were transferred to TXU Europe Group on August 3, 2000.

  Also  on  August  3, 2000, TXU Europe Group announced that its  subsidiary,
Eastern  Energy,  had contracted its customer services operations  to  Vertex
Data  Science  Limited  (Vertex), United Utilities  plc's  customer  services
business.  Customer services include call centers, billing, credit management
and   debt  collection.  Eastern  Energy's  1,335  customer  services   staff
transferred to Vertex on September 1, 2000.

  TXU  Europe Group sells electricity and natural gas principally  under  the
brand names of Eastern Energy and Norweb Energi.

  TXU  Europe  Group,  through  its  subsidiaries,  supplies  electricity  to
customers in almost all sectors of the UK and, at December 31, 2000,  is  the
largest  retailer  of electricity and the second largest energy  retailer  in
England and Wales. TXU Europe primarily serves markets in the East of England
(through  Eastern  Energy),  and the North West of  England  (through  Norweb
Energi).   At   December  31,  2000,  TXU  Europe  supplied  electricity   to
approximately 4.4 million customers.

  TXU  Europe Group is one of the largest suppliers of natural gas in the UK.
At  December  31,  2000,  it was supplying gas to approximately  1.1  million
customers  in the UK, ranging from residential households to large industrial
companies.  TXU Europe Group's share of the UK gas market, based on volume of
gas delivered, was approximately 6% at December 31, 2000.

  TXU  Europe Group is seeking new ways to access the energy markets  and  to
form more partnerships with the objective of reducing costs, improving access
to  customers and capitalizing on emerging new markets like the Internet.  In
December 2000, TXU Europe Group acquired, for approximately pounds 4 million,
a  20%  interest in Servista.com Limited, an on-line provider of  energy  and
communications  services.  TXU Europe Group will  be  the  sole  supplier  of
energy sold under the Servista.com brand for an initial period of five years.

COMPETITION IN ELECTRICITY RETAILING

  TXU  Europe  Group  is  an  active participant in  the  UK  industrial  and
commercial electricity market. TXU Europe Group estimates that this market is
approximately pounds 6 billion per year based upon electricity prices at that
date. TXU Europe Group competes in this market on the basis of the quality of
its  customer  service and by competitive pricing. Sales  to  industrial  and
commercial  customers  accounted  for  approximately  40%  of  TXU   Europe's
electricity  sales  revenues in 2000.  As of December 31,  2000,  TXU  Europe
Group's  share  of  this  market  (including  Norweb  Energi's  portion)  was
approximately 16% based on information from Data Monitor.

  Competition  has now been fully introduced for customers in  all  areas  of
the  UK.  TXU  Europe  Group competes nationally for  residential  and  small
business  customers  and,  by December 31, 2000,  it  was  supplying  289,000
customers  outside its principal geographical markets in the East  and  North
West of England.  At December 31, 2000, TXU Europe Group had agreed contracts
with a further 27,000 electricity customers.  One of the major competitors in
TXU  Europe  Group's traditional service area, and for new customers  outside
this  serve  area,  is  Centrica plc (trading as British  Gas)  which  has  a
substantial presence in markets nationwide through its existing gas  customer
base.

                                11

<PAGE>
  There  is  no  assurance  whether  or not competition  among  suppliers  of
electricity will adversely affect TXU Europe Group.

COMPETITION IN GAS SUPPLY BUSINESS

  As  a  result  of UK government action in recent years, the UK  retail  gas
supply  market  is open to competition.  TXU Europe Group's main  competitors
are  Centrica  plc (trading as British Gas nationwide) and the gas  marketing
arms  of  some  major oil companies.  Further competition is  provided  by  a
number  of  other electricity companies and smaller gas suppliers  which  are
independent  of the major oil companies and which each have a minor  presence
in the market.

  On  August  3, 2000, TXU Europe Group acquired the gas supply interests  of
Norweb  Gas  Ltd as part of the Norweb Energi acquisition. TXU  Europe  Group
intends  to  maintain a significant share of this market through  strong  new
propositions, serving customer needs, with competitive pricing and  excellent
service.

REGULATORY MATTERS

  Subject to specific exceptions, retail suppliers of electricity in  the  UK
are  required  either  to have a public electricity  supply  license  for  an
authorized area or to obtain a Second Tier Supply license. Public electricity
supply  license holders are required under the Electricity Act to  provide  a
supply of electricity upon request to any premises in their authorized  area,
except  in  specified circumstances. Each public electricity  supply  license
holder is subject to various obligations. These include prohibitions on cross-
subsidies  among  its  various  regulated businesses  and  discrimination  in
respect  of  the supply of customers. Each public electricity supply  license
holder  is also required to offer open access to its distribution network  on
non-discriminatory  terms.  This obligation includes  a  requirement  not  to
discriminate  between  its  own  supply  business  and  other  users  of  its
distribution system. Public electricity supply license holders are subject to
separate controls on the tariffs to ex-franchise customers and in respect  of
distribution charges.

  Under  regulatory arrangements, supply price controls became  effective  on
April 1, 2000. The scope of the controls has been reduced to remove all small
businesses  and  some residential customers from direct price  controls.  TXU
Europe Group's directly controlled tariffs were reduced by an average of 7.1%
from April 1, 2000 as required by the new controls, resulting in an estimated
reduction  in  annual revenues of approximately pounds  15  million.  As  the
market is opened further to competition, it is expected that price restraints
will  no longer be applied to domestic customers. The DGES has indicated that
he hopes to be able to remove price controls effective April 1, 2002.

  The  natural  gas  supply activities of TXU Europe  Group  are  principally
regulated by the Authority under the UK Gas Act 1986 (as amended) and by  the
conditions  of TXU Europe Group's gas licenses. Eastern Natural Gas  (Retail)
currently holds a gas supplier's license and other subsidiaries of TXU Europe
Group  currently hold gas shipper's licenses. TXU Europe Group's natural  gas
supply business is not subject to price regulation.


                              NETWORKS SEGMENT

ELECTRICITY DISTRIBUTION

  TXU   Europe  Group's  electricity  networks  business  consists   of   the
ownership,  management and operation of the electricity distribution  network
within  TXU  Europe  Group's  authorized area.   TXU  Europe  Group  receives
electricity in England and Wales from National Grid.  TXU Europe  Group  then
distributes  electricity  to  end  users  connected  to  TXU  Europe  Group's
distribution system.

  Almost all electricity customers in TXU Europe Group's authorized area  are
connected to and dependent upon TXU Europe Group's distribution system.   TXU
Europe Group distributes approximately 33 TWh of electricity annually to over
three  million  customers, representing more than seven million  people.  The
distribution  by  TXU Europe Group of electricity in its authorized  area  is
regulated  by  its public electricity supply license, which,  other  than  in
exceptional circumstances, is due to remain in effect until at least 2025.

  In  March  2000, upon receiving all final approvals, TXU Europe  Group  and
EDF London Investments plc, a subsidiary of Electricite de France, created an
equally  held  joint  venture company, named "24seven", for  the  management,
operation  and  maintenance  of  their subsidiaries'  respective  electricity

                                12

<PAGE>
distribution networks.  The new joint venture began operations  on  April  7,
2000.  TXU Europe accounts for its investment in 24seven by the equity method
of  accounting.   24seven serves over five million electricity  customers  in
London  and  the  eastern  counties  of  England.   Employees  of  the  joint
venturers'  subsidiaries, Eastern Electricity plc (Eastern  Electricity)  and
London  Electricity  plc,  have been transferred  to  24seven.  The  physical
distribution system assets, as well as all operating licenses, continue to be
separately   owned  by  Eastern  Electricity  and  London  Electricity   plc,
respectively.   (See  Note  2  to Consolidated  Financial  Statements  for  a
discussion of restructuring and other related costs.)

PHYSICAL DISTRIBUTION SYSTEM

  TXU  Europe  Group  receives electricity from National Grid  at  19  supply
points within its authorized area and five points in the authorized areas  of
neighboring  regional  electricity companies.  Most of  this  electricity  is
received at 132 kilovolts (kV).  It is then distributed to customers  through
TXU  Europe  Group's  system of approximately 35,100 kilometers  of  overhead
lines,  55,200 kilometers of underground cable and numerous transformers  and
circuit  breakers, through a series of interconnected networks  operating  at
successively  lower  voltages.  TXU Europe Group  also  receives  electricity
directly  from generating stations located in its authorized area  and,  from
time  to  time,  from customers' own generating plants and  connections  with
neighboring regional electricity companies.

  The  following  information is maintained on a regulatory year  end  basis,
which  is March 31.  Therefore, at March 31, 2000, the latest date for  which
this  information  is available, TXU Europe Group's electricity  distribution
system network, excluding service connections to consumers, included overhead
lines and underground cables at the operating voltage levels indicated in the
table below:

<TABLE>
<CAPTION>


                      Overhead lines           Underground Cables
Operating voltage    (Circuit Kilometers)      (Circuit Kilometers)

<S>                        <C>                        <C>
132kV                       2,365                        221
33kV                        3,883                      2,486
25kV                            1                         27
11kV                       19,352                     16,783
6.6kV                           0                         29
3kV                             0                         21
LV                          9,515                     35,601
                          -------                    -------
  Total                    35,116                     55,168
                          =======                    =======
</TABLE>
  In  addition  to  the  overhead lines and underground  cables  referred  to
above, TXU Europe Group's distribution facilities also include:

<TABLE>
<CAPTION>

                                       Aggregate capacity
  Transformers         Number          (mega volt amperes)

   <S>                 <C>                   <C>
   132kV                  233                13,392
   33kV                   872                10,383
   11kV                61,709                14,868
                      -------               -------
    Total              62,814                38,643
                      =======               =======

</TABLE>

Customers

  Most  of  the  revenues from use of the distribution  system  is  from  TXU
Europe  Group's electricity retail operations.  The rest is from  holders  of
second  tier  supply licenses in respect of the delivery  of  electricity  to
their customers located in Eastern Electricity's service area.

                                13

<PAGE>
  The  following  table sets out details of TXU Europe Group's customers  and
electricity units distributed:

<TABLE>
<CAPTION>


                                       Regulatory Year ended March 31
                                       ------------------------------
                                          2000      1999       1998
                                       --------   -------    --------
<S>                                      <C>       <C>        <C>
Numbers of customers connected at         3,261     3,226      3,155
  March 31 ('000)

Electricity distributed (gigawatt        33,100    32,700     31,776
  hours -GWh)

</TABLE>

SYSTEM PERFORMANCE

  The  performance of all UK distribution networks is monitored and  publicly
reported  upon  annually  by  OFGEM. The four key  statistics  employed  are:
security  (customer interruptions per 100 connected customers);  availability
(customer minutes lost per connected customer); reliability (main faults  per
100km  network)  and  quality of service (percentage of  supply  restorations
achieved  within  3  hours).  During the year ended March 31,  2000,  Eastern
Electricity:

   - maintained the highest performance of all public electricity  supply
     license holders for reliability;

   - became  the leading company in terms of performance for  quality  of
     service, improving further from second place last year;

   - became the second highest performing company in terms of availability,
     improving from third place last year; and

   - maintained the fourth highest performance for security.

   Eastern  Electricity  has continuously improved  its  overall  quality  of
supply  performance  and continues to be the only public electricity  license
holder to achieve a "top four" position in each of the above key measures.

DISTRIBUTION CHARGES AND PRICE CONTROL

  The  distribution  charges levied by subsidiaries of TXU Europe  Group  and
the  other regional electricity companies consist of charges for use  of  the
system and charges for other services outside the scope of the price control,
including  connection charges.  Distribution and supply charges are regulated
by  conditions in TXU Europe Group's public electricity supply license, which
sets  out  a formula for determining the maximum average charge per  unit  of
electricity distributed in any regulatory year.  Sales of TXU Europe  Group's
electricity network business consist primarily of charges for the use of  its
distribution  system,  most  of  which  are  levied  on  TXU  Europe  Group's
electricity retail business, being the largest supplier from the network, and
are  passed through to its customers.  Most of the charges for the use of the
distribution system are subject to distribution price controls.

COMPETITION IN THE ELECTRICITY NETWORKS BUSINESS

  At  present,  TXU  Europe  Group  experiences  little  competition  in  the
operation  of its electricity distribution system.  In limited circumstances,
some customers may establish or increase capacity for their own generation by
becoming  directly  connected to National Grid or by establishing  their  own
generating  capacity; they then avoid charges for the use of the distribution
system.   TXU  Europe  Group does not currently consider this  a  significant
threat to its electricity networks business.

                                14

<PAGE>

REGULATORY MATTERS

Distribution Price Regulation

 -  A formula determines the maximum average price per unit of electricity
    distributed, in pence per kilowatt-hour, that a regional electricity
    company is entitled to charge.  This price, when multiplied by the
    expected number of units to be distributed, determines the expected
    distribution revenues of the regional electricity company for the
    relevant year.  The formula permits regional electricity companies to
    retain part of their additional revenues due to increased distribution
    of units and allows for a pound sterling for pound sterling increase in
    operating profit for efficient operations and reduction of expenses
    within a review period.

  In  December  1999, OFGEM issued a report proposing a range of  substantial
net  revenue  reductions  for  the distribution businesses  of  all  regional
electricity companies in the UK.  The final proposals for Eastern Electricity
incorporated an initial reduction in allowed revenues for regulated units  of
28%  from April 1, 2000 with further annual reductions of 3% per year for the
next  four  years,  adjusted by inflation.  The  effect  on  revenues  was  a
reduction  of pounds 65 million in the year ending December 31, 2000  and  is
estimated  to be a further reduction of about pounds 30 million in  the  year
ending  December 31, 2001.  In April 2000, the DGES established a  new  basis
for  the  allowed revenues that can be received by distribution for the  next
five years.

  Electricity  distributed to extra high voltage premises  is  excluded  from
the   distribution  price  control  formula,  as  are  charges  for  specific
additional services including connection charges.  Connection charges must be
set  at  a  level  which enables the licensee to recover  no  more  than  the
appropriate  proportion of the costs incurred and no more than  a  reasonable
rate  of return on the capital represented by those costs.  Any dispute  over
connection  charges  may  be  determined by the DGES.   In  addition,  income
received  in  respect  of  exit charges related to  National  Grid  that  are
incurred  by  a  regional  electricity company and  received  through  system
charges is not subject to distribution price control.

  The  DGES may propose amendments to the distribution price control  formula
or  any  other terms of the license.  In the cases where a public electricity
supply  license holder is not willing to accept modifications to the  license
conditions put forward by the DGES, the normal process would be for the  DGES
to  refer  the  matter to the Competition Commission for a  determination  of
whether continued operation without the proposed license modifications is  in
the public interest.

  In  April  2000,  following the Distribution Price  Control  Review,  OFGEM
initiated a new review known as the Information and Incentives Project.  This
project  was  described  in  the final proposals of  the  Distribution  Price
Control  Review.   This  project is intended to increase  the  incentives  on
companies to improve quality of service and reduce the uncertainty around the
price  control  review process.  It is intended that an  incentive  framework
rewarding or penalizing companies by up to 2% of revenue, based on a  measure
of network performance, will be introduced beginning April 2002.

  OFGEM  has  proposed to include a new license condition to  facilitate  the
recording  of information relating to network performance required  for  this
framework.


                                    OTHER

  In  May  2000,  TXU  Europe  Group sold its metering  business  to  Siemens
Metering Limited for pounds 36 million.

  In  August  2000,  TXU Europe Group completed the sale of its  interest  in
Severomoravska  energetika a.s., the largest Czech  electricity  distribution
and supply company, for total proceeds of approximately pounds 51 million.

EMPLOYEES

  At  December  31,  2000, TXU Europe and its subsidiaries had  approximately
3,200 full-time employees.

  Union  membership existed at TXU Europe Group when it was  privatized.  TXU
Europe Group recognizes trade unions for collective bargaining purposes,  and
approximately  29%  of employees of TXU Europe Group's businesses  are  union
members.   New companies set up by TXU Europe Group after privatization  have
no  obligations to recognize trade unions.  TXU Eastern Natural Gas  and  TXU

                                15

<PAGE>
Europe  Energy  Trading do not recognize trade unions, and  most  workers  in
these businesses are employed under individual contracts.  There have been no
industrial  disputes or work stoppages at TXU Europe Group during the  period
following its privatization in 1990.

UK AND EU FAIR COMPETITION LAW

  TXU Europe Group is subject to the fair competition, or antitrust, rules
of both the UK and the EU.

  The  UK Fair Trading Act 1973 and the UK Competition Act 1998 both regulate
the  activities  of  companies with market power.  In  broad  terms,  the  UK
Competition  Act  1998  conforms to fair trade laws  at  the  EU  level.   It
prohibits  anti-competitive agreements that have  the  object  or  effect  of
restricting, distorting or preventing competition in the UK or a  substantial
part  of  it.   It  also  prohibits abuses of dominant market  positions  and
introduces stricter enforcement and investigative powers.

  The  Treaty  of  Rome  contains provisions which prohibit  anti-competitive
agreements  and practices, including the abuse of a dominant position  within
the  EU  or  a  substantial part of it.  Penalties  for  violation  of  these
provisions   includes  fines,  third  party  damages  and  making  infringing
contractual provisions unenforceable.

  EU  Directive 93/96 was implemented by the UK in December 1996  and  covers
service contracts as well as supply and work contracts.  Those contracts that
exceed  the  relevant  financial thresholds have  to  be  advertised  in  the
Official  Journal  of the European Communities.  Disappointed  suppliers  and
contractors who believe they have suffered harm from a company's  failure  to
implement the correct procedures in awarding a contract are able to institute
proceedings in the English High Court.  The European Commission  also  has  a
role for ensuring compliance with EU procurement regulations.


                            ENVIRONMENTAL MATTERS

ENVIRONMENTAL REGULATIONS AND EMISSIONS

  TXU   Europe   Group's  businesses  are  subject  to  numerous   regulatory
requirements  with  respect  to  the  protection  of  the  environment.   The
electricity  generation  industry in the UK is  subject  to  a  framework  of
national and EU environmental laws which regulate the construction, operation
and   decommissioning  of  generating  stations.   Under  these  laws,   each
generating  station  operated by TXU Europe Group  is  required  to  have  an
authorization which regulates its releases into the environment and seeks  to
minimize pollution of the environment taken as a whole, having regard to  the
best available techniques not entailing excessive cost.  These authorizations
are  issued  by  the  UK Environment Agency which has the responsibility  for
regulating  the  impact  of  TXU Europe Group's generating  stations  on  the
environment.   The  principal laws which have environmental implications  for
TXU Europe Group are the Electricity Act, the UK Environmental Protection Act
1990 and the UK Environment Act 1995.

  The  Electricity Act requires TXU Europe Group to consider the preservation
of  natural  beauty and the conservation of natural and man-made features  of
particular  interest  when it formulates proposals for development  of  power
stations with a capacity in excess of 50 MW or installation of overhead power
lines.   Environmental assessments are required to be  carried  out  in  some
cases,  including overhead line constructions at high voltages and generating
station  developments.   TXU Europe Group has produced  Environmental  Policy
Statements and Electricity Act Schedule 9 Statements which explain the manner
in which it complies with its environmental obligations.

  TXU  Europe  Group has approximately 680 and 192 kilometers of  underground
cables  insulated with an oil-filled wrap which operate at  33kV  and  132kV,
respectively.  This type of cable is in common use by utilities in the UK and
parts  of  continental  Europe.   These cables generally  supply  substantial
amounts  of  electricity to large substations in urban  areas  and  to  large
customers.   Most of TXU Europe Group's cables are between 30  and  50  years
old.   TXU  Europe  Group  operates  these  cables  in  accordance  with  the
Environment  Agency's Operating Code for Fluid-Filled Cables, monitoring  and
repairing  both  gradual  and  substantial  leaks  that  arise  through   age
deterioration and damage by a third party.  TXU Europe Group has a program to
reduce  oil leakage and minimize the possibility of pollution to watercourses
and  ground  water.   This  involves establishing a more  effective  standard
procedure  for  dealing with cable leaks and implementation of  an  effective
monitoring  system.  TXU Europe Group also has a plan for gradual replacement
and  refurbishment  of  these cables with more modern  solid  cables  in  the
future.   TXU Europe Group believes that its existing monitoring systems  and

                                16

<PAGE>
planned  replacement and refurbishment program effectively minimize the  risk
of major environmental incidents or additional replacement expenditures.  TXU
Europe  Group  could incur significant expenditures if it  were  required  to
replace  its  fluid-filled  cables, other than  in  the  ordinary  course  of
business, pursuant to new or existing legislation; however, TXU Europe  Group
is  not aware of any plans of any governmental authority to impose that  kind
of requirement.

The principal EU Directive affecting atmospheric emissions to the environment
is the Large Combustion Plants Directive, which required the UK to reduce its
sulfur  dioxide  (SO2) emissions and nitrogen oxides (NOx).  Discussions  are
under  way  in  the  EU  regarding an update of the Large  Combustion  Plants
Directive  (which  will  introduce tighter  emission  controls)  as  well  as
national  limits for 2010.  The UK Environmental Agency has recently reviewed
each coal-fired station's authorizations and has modified the limits for  SO2
emissions to apply in the period prior to 2005. TXU Europe Group is  building
a  flue  gas desulphurization plant at its West Burton station to reduce  the
sulphur  output  of  the  plant.   It  is  anticipated  that  the  flue   gas
desulphurization plant will begin operating in autumn 2003.

  At  a local level, the UK's Air Quality Strategy sets targets for 2005  and
places  a  duty  on local authorities to review air quality with  a  view  to
setting  up action plans for management in places where targets are  unlikely
to  be  met. TXU Europe Group's are developing management plans in  order  to
ensure compliance with the Strategy's objectives.

  In  December  1997,  the Conference of the Parties of  the  United  Nations
Framework  Convention  on  Climate Change adopted the  Kyoto  Protocol  which
specifies targets and timetables to reduce greenhouse gas emissions.   The UK
is  a signatory to the Kyoto Protocol and is committed to a 12% reduction  in
national carbon dioxide emissions by 2010.

  TXU  Europe  Group  believes that it is currently in compliance  with,  has
taken,  and intends to continue to take, measures to comply, in all  material
respects,  with  the  applicable  law  and  government  regulations  for  the
protection of the environment.  There are no material legal or administrative
proceedings   pending  against  TXU  Europe  Group  with   respect   to   any
environmental matter.

  Estimated  capital expenditure on environmental control facilities is pounds
54 million in 2001, pounds 36 million in 2002 and pounds 9 million in 2003.

FOSSIL FUEL LEVY

  All  the  regional electricity companies are obliged to obtain a  specified
amount  of  generating capacity from renewable, or non-fossil fuel,  sources.
(See  "OPERATING  SEGMENTS  - Portfolio Trading and  Power  Segment  -  Other
Projects".)  Because electricity generated from renewable energy  sources  is
generally  more  expensive than electricity from fossil fuel plants,  a  non-
fossil  fuel obligation levy has been instituted to reimburse the  generators
and  the  regional electricity companies for the extra costs  involved.   The
DGES  sets  the  rate of the non-fossil fuel obligation levy  annually.   The
current fossil fuel levy is 0.3% of the value of sales of electricity made in
England  and  Wales  and 0.8% of the value of sales of  electricity  made  in
Scotland.


                                17

<PAGE>
Item 2.  PROPERTIES

  The  principal  properties  owned or occupied by TXU  Europe's  businesses,
other than its distribution properties, are as follows:

<TABLE>
<CAPTION>
                                                               Remaining                         Site Area (acres
                                                                Term of       Principal          except where
     Property          Owner/Leaseholder          Interest      Lease          Use               indicated)
-------------------   ---------------------    ------------   -----------    -----------------   ----------------
<S>                    <C>                        <C>          <C>            <C>                <C>
The Adelphi, London    TXU Europe Group plc       Leasehold    15 years       Offices            14,905 sq.ft.
Bedford                TXU Europe Group plc       Freehold        --          Offices and Depot      5.0
Carterhatch Lane,      TXU Europe Group plc       Freehold        --          Offices and Depot      4.0
   Enfield
Milton, Cambridge      TXU Europe Group plc       Freehold        --          Depot                 19.0
Rayleigh               TXU Europe Group plc       Freehold        --          Offices and Depot      8.0
Wherstead Park,        TXU Europe Group plc       Freehold        --          Offices            80,000 sq.ft.
   Wherstead, Ipswich
Russell House          TXU Europe Group plc       Freehold        --          Offices            94,500 sq.ft.
Suffolk House          TXU Europe Group plc       Leasehold    2 years        Offices            44,000 sq.ft.
Fison House            TXU Europe Group plc       Leasehold    3 years        Offices            24,000 sq.ft.
Constantine House      TXU Europe Group plc       Leasehold    5 years        Offices            54,000 sq.ft.
King's Lynn Power      Anglian Power              Freehold        --          Power station         16.1
   Station                Generators Limited
Peterborough Power     TXU Europe Power           Freehold        --          Power station         18.1
   Station                Limited
Drakelow C Power       TXU Europe Merchant        Leasehold    95 years       Power station        177.0
   Station                Properties Limited
High Marnham Power     TXU Europe Merchant        Leasehold    95 years       Power station        178.4
   Station                Properties Limited
Ironbridge Power       TXU Europe Merchant        Leasehold*   95 years       Power station        212.7
   Station                Properties Limited
Rugeley B Power        TXU Europe Merchant        Leasehold*   95 years       Power station        299.0
   Station                Properties Limited
West Burton Power      TXU Europe Merchant        Leasehold*   95 years       Power station        511.5
   Station                Properties Limited

<FN>
  *  In  January 2001, TXU Europe Group exercised its option to purchase  the
  freehold  interest  on  these  plants.  Therefore,  these  plants  are  now
  freehold interest from that time.

  </FN>
  </TABLE>
     For  more  information  concerning  TXU  Europe  Group's  UK  generating
stations, see - "OPERATING SEGMENT - Portfolio Trading and Power Segment".


Item 3.  LEGAL PROCEEDINGS

   TXU  Europe  and  its subsidiaries are party to lawsuits  arising  in  the
ordinary course of their business.  TXU Europe believes, based on its current
knowledge and the advice of counsel, that the ultimate resolution of all such
lawsuits and resulting claims would not have a material adverse effect on its
financial position, results of operation or cash flows.

  In  February  1997,  the official government representative  of  pensioners
(Pensions  Ombudsman) made a final determination against  the  National  Grid
Company plc (National Grid) and its group trustees with respect to complaints
by  two  pensioners  in  National Grid's section of  the  Electricity  Supply
Pension  Scheme (ESPS).  The determination related to the use of the  pension
fund  surplus  resulting from the March 31, 1992 actuarial valuation  of  the
National  Grid  section to meet certain costs arising  from  the  payment  of
pensions  on  early  retirement  upon  reorganization  or  downsizing.   This
determination  was  set aside by the High Court on June  10,  1997,  and  the
arrangements made by National Grid and its group trustees in dealing with the
surplus  were  confirmed. The two pensioners appealed this  decision  to  the
Court  of  Appeal,  and  judgment was received.  The  judgment  endorsed  the
Pensions  Ombudsman's determination that the corporation was not entitled  to
unilaterally  deal with any surplus. National Grid appealed the  decision  to
the  House of Lords.  The appeal has been heard and judgement is expected  to
be handed down in the second quarter of 2001.  If a similar complaint were to
be  made against TXU Europe Group in relation to its use of actuarial surplus
in its section of the ESPS, it would vigorously defend the action, ultimately
through  the  courts.  However, if a determination were finally  to  be  made

                                18

<PAGE>
against  it and upheld by the courts, TXU Europe Group could have a potential
liability  to  repay to its section of the ESPS an amount  estimated  by  TXU
Europe  Group  to  be up to pounds 45 million, exclusive  of  any  applicable
interest charges.

  TXU  Europe  Group's  section  of  the Electricity  Supply  Pension  Scheme
remains  in  substantial  surplus and any payment  to  the  plan  that  might
ultimately  prove to be necessary would be accounted for as  an  increase  in
pension  assets, and would not have an immediate impact on income.   However,
any  related penalties or interest (which could be assessed, though none  are
currently proposed) would adversely affect income.  There can be no assurance
as to the outcome of this matter.

  On  January  25, 1999, the Hindustan Development Corporation  (HDC)  issued
arbitration proceedings in the Arbitral Tribunal in Delhi, India against  TEG
(now  Energy Holdings (No.3) Limited), claiming damages of pounds 255 million
for  breach  of  contract following the termination of  a  Joint  Development
Agreement dated March 20, 1997 relating to the construction, development  and
operation  of  a lignite based thermal power plant at Barsingsar,  Rajasthan.
On  November  21, 2000, the Arbitrators issued their decision  and  dismissed
HDC's claim in full, and TEG was liable only for its own legal costs involved
in  the case, an estimated pounds 1 million.  On December 21, 2000, HDC filed
a  Request  for  Clarification of the Arbitrators' decision  (Request)  under
Section  33 of the Arbitration and Conciliation Act, the purpose of which  is
to  entitle a party to arbitration to seek clarification of language used  in
the  Arbitrators' decision.  TEG filed its response to the Request on January
15,  2001, asserting that the Request was untimely made and that the language
used  by the Arbitrators needed no clarification.    TXU Europe believes that
the  Arbitrators  will have no alternative but to dismiss the  Request.   The
effect  of filing the Request, however, has been to stay the time HDC has  to
file an appeal of the Arbitrators' decision.

  In  August  2000,  the  Spanish Stock Market Commission  announced  it  was
opening  an  investigation as to whether TXU Europe and Electrabel  acted  in
concert  over share purchases of Hidrocantabrico in order to avoid  making  a
formal  takeover  bid.  TXU Corp. was originally named  as  a  party  but  is
seeking its removal from these proceedings. Philip Turberville, the principal
executive officer of TXU Europe, was also named as a party in the
investigation.  If the two utilities are found to be in violation
of Spanish securities law, they could face a substantial fine and other
restrictions.  The investigation could last until February  2002.
TXU  Europe  is unable to determine what impact there may be, if  any,  as  a
result of the investigation.  TXU Europe and TXU Corp. believe there has been
no  violation of Spanish securities laws and are fully cooperating  with  the
investigation.



Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None



                                19

<PAGE>

                                   PART II

Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

All of TXU Europe's outstanding share capital is held indirectly by TXU Corp.



Item 6.  SELECTED FINANCIAL DATA

The information required hereunder for TXU Europe is set forth under Selected
Financial Data included in Appendix A to this report.



Item  7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

The  information  required  hereunder for  TXU  Europe  is  set  forth  under
Management's  Discussion and Analysis of Financial Condition and  Results  of
Operations included in Appendix A to this report.



Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  information  required  hereunder for  TXU  Europe  is  set  forth  under
Management's  Discussion and Analysis of Financial Condition and  Results  of
Operations included in Appendix A to this report.



Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  information  required  hereunder for  TXU  Europe  is  set  forth  under
Statement  of  Responsibility, Independent Auditors'  /Accountants'  Reports,
Statements  of  Consolidated Income, Statements of Consolidated Comprehensive
Income,  Statements of Consolidated Cash Flows, Consolidated Balance  Sheets,
Statements  of  Consolidated Shareholder's Equity and Notes  to  Consolidated
Financial Statements as included in Appendix A to this report.



Item  9.   CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING  AND
FINANCIAL DISCLOSURES

On  August 6, 1999, based upon the recommendation of its Audit Committee, the
Board  of Directors of TXU Europe voted to appoint Deloitte & Touche  as  the
principal accountants for TXU Europe and its subsidiaries for the year  ended
December  31,  1999.   TXU  Europe chose not to continue  the  engagement  of
PricewaterhouseCoopers, its former principal accountants.   The  decision  by
TXU  Europe  to change principal accountants was made in order to  align  the
principal  accountants  of TXU Europe with those of  TXU  Corp.   Deloitte  &
Touche  LLP  have  been  the principal accountants  for  TXU  Corp.  and  its
predecessors since 1945.

No  report  of  PricewaterhouseCoopers on TXU Europe's financial  statements,
including  the period from formation, February 5, 1998, through December  31,
1998,  contained any adverse opinion or disclaimer of opinion,  nor  was  any
report qualified in any manner.

During  the  period from formation through December 31, 1998 and  the  period
from  January  1,  1999 to August 6, 1999, there were no  disagreements  with
PricewaterhouseCoopers on any matter of accounting principles  or  practices,
financial  statement disclosure or auditing scope or procedure.  During  this
period,  there  were no "reportable events" as that term is defined  in  Item
304(a)(1)(v) of Regulation S-K of the Securities Act.


                                20

<PAGE>
TXU  Europe requested and received from PricewaterhouseCoopers a letter dated
August  9,  1999 addressed to the Securities and Exchange Commission  stating
that  it  agreed  with  the above statements for the  period  from  formation
through  December 31, 1998 and the period from January 1, 1999 to  August  6,
1999.

On  August  6,  1999, TXU Europe engaged Deloitte & Touche as  its  principal
accountants  to  audit the financial statements for the year ending  December
31,  1999.  TXU Europe has not consulted Deloitte & Touche regarding  any  of
the  matters or events listed in Item 304(a)(2)(i) and (ii) of Regulation S-K
of  the  Securities Act.  TXU Corp. had routine discussions with  Deloitte  &
Touche  LLP  concerning the application of accounting  principles  and  other
matters   primarily  relating  to  the  application  of  purchase  accounting
principles to the consolidated financial statements of TXU Corp.   TXU  Corp.
and  Deloitte  & Touche LLP do not believe that these discussions  constitute
consultations within the context of Item 304(a)(2) of Regulation S-K.



                                  PART III



Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Item  10 is not presented herein as TXU Europe meets the conditions set forth
in General Instruction (I) (1) (a) and (b).



Item 11. EXECUTIVE COMPENSATION

Item  11 is not presented herein as TXU Europe meets the conditions set forth
in General Instruction (I) (1) (a) and (b).



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item  12 is not presented herein as TXU Europe meets the conditions set forth
in General Instruction (I) (1) (a) and (b).



Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item  13 is not presented herein as TXU Europe meets the conditions set forth
in General Instruction (I) (1) (a) and (b).




                                21

<PAGE>

                                   PART IV



Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)  Documents filed as part of this report:                       Page

  Financial Statements (included as Appendix A to this report):

     Selected Financial Data                                        A-2

     Management's Discussion and Analysis of Financial Condition
       and  Results of Operations                                   A-4

     Statement of Responsibility                                    A-23

     Independent Auditors'/Accountants' Reports                     A-24

     Statements of Consolidated Income                              A-27

     Statements of Consolidated Comprehensive Income                A-28

     Statements of Consolidated Cash Flows                          A-29

     Consolidated Balance Sheets                                    A-30

     Statements of Consolidated Shareholder's Equity                A-31

  Notes to Consolidated Financial Statements                        A-32

  The  financial  statement schedules are omitted because of the  absence  of
  the  conditions  under  which they are required  or  because  the  required
  information is included in the consolidated financial statements  or  notes
  thereto.

  (b)  Reports on Form 8-K:

     Reports on Form 8-K filed since September 30, 2000, are as follows:

          Date of Report           Item Reported
          ---------------        ----------------
          None

  (c)  Exhibits:

          Included in Appendix B to this report.



                                22

<PAGE>

                                 SIGNATURES
     Pursuant  to  the requirements of Section 13 or 15(d) of the  Securities
Exchange  Act of 1934, TXU Europe Limited has duly caused this report  to  be
signed on its behalf by the undersigned, thereunto duly authorized.

                                  TXU EUROPE LIMITED


Date:    March 7, 2001        By    /s/ Philip G Turberville
                                  ----------------------------
                                  Name: Philip G Turberville
                                  Title: Principal Executive
                                         Officer and Director



   Pursuant to the requirements of the Securities Exchange Act of 1934,  this
   report  has  been signed below by the following persons on behalf  of  TXU
   Europe Limited and in the capacities and on the date indicated.

          Signatures                 Title            Date


         /s/ Erle Nye             Chairman and
  ---------------------------     Director
          (Erle Nye)

   /s/ Philip G Turberville       Principal
  ---------------------------     Executive
    (Philip G Turberville)        Officer and
                                  Director


       /s/ Paul C Marsh           Principal
  ---------------------------     Financial
        (Paul C Marsh)            Officer and
                                  Director


      /s/ Derek C Bonham          Director
  ---------------------------
       (Derek C Bonham)                            March 7, 2001

     /s/ H Jarrell Gibbs          Director
  ---------------------------
      (H. Jarrell Gibbs)

    /s/ Michael J McNally         Director
  ---------------------------
     (Michael J McNally)

   /s/ Robert A Wooldridge        Director
  ---------------------------
    (Robert A Wooldridge)

   /s/ Scott R J Longhurst        Principal
  ---------------------------     Accounting
    (Scott R J Longhurst)         Officer



                                23

<PAGE>
                                                                   Appendix A






TXU EUROPE LIMITED AND SUBSIDIARIES

INDEX TO FINANCIAL INFORMATION
December 31, 2000

                                                              Page


Selected  Financial Data - Consolidated Financial and
  Operating Statistics                                        A- 2
Management's Discussion and Analysis of Financial
  Condition and Results of Operations                         A- 4
Statement of Responsibility                                   A- 23
Independent Auditors'/Accountants' Reports                    A- 24

Financial Statements:

  Statements of Consolidated Income                           A- 27
  Statements of Consolidated Comprehensive Income             A- 28
  Statements of Consolidated Cash Flows                       A- 29
  Consolidated Balance Sheets                                 A- 30
  Statements of Consolidated Shareholder's Equity             A- 31
  Notes to Consolidated Financial Statements                  A- 32




                                A-1

<PAGE>


                     TXU EUROPE LIMITED AND SUBSIDIARIES
                           SELECTED FINANCIAL DATA
                      CONSOLIDATED FINANCIAL STATISTICS

  TXU  Europe  Limited  (TXU Europe), a private limited company  incorporated
under  the laws of England and Wales on February 5, 1998 (Formation),  is  an
indirect wholly-owned subsidiary of TXU Corp., a Texas corporation.   On  May
19,  1998,  TXU  Europe obtained control of The Energy Group PLC  (TEG),  the
former  holding company of TXU Europe Group plc, formerly Eastern Group  plc,
(TXU  Europe Group).  For financial reporting purposes, TXU Europe  Group  is
considered  to  be the "Predecessor Company" to TXU Europe. Earnings  of  TXU
Europe  Group are not reflected in TXU Europe's results before May 19,  1998,
other  than as a result of TXU Europe's 22% equity interest in the net income
of  TEG for the period from March through May 18, 1998.  Since May 19,  1998,
TXU  Europe  has  accounted  for  TEG and TXU Europe  Group  as  consolidated
subsidiaries.   Also  on May 19, 1998, TEG sold its United  States  (US)  and
Australian coal businesses and US energy marketing operations.

  The   acquisition  of  TEG  was  accounted  for  as  a  purchase   business
combination  in accordance with accounting principles generally  accepted  in
the United States of America (US GAAP).  The total purchase consideration for
the  TEG businesses acquired was approximately pounds 4.4 billion. The excess
of  the purchase consideration plus acquisition costs over the net fair value
of  tangible  and  identifiable intangible assets  acquired  and  liabilities
assumed  resulted in goodwill of pounds 3.5 billion, which is being amortized
over 40 years.

  The  selected  financial  data  of TXU Europe  and  Predecessor  have  been
derived  from the audited financial statements of TXU Europe and  TXU  Europe
Group and have been prepared in accordance with US GAAP.

<TABLE>
<CAPTION>




                                                                           Predecessor
                                                                     ----------------------
                                                         Period      Period from
                                                          from         April 1,
                                        Year Ended      Formation       1998        Year
                                        December 31,     Through      Through      Ended
                                     ----------------  December 31,    May 18,    March 31,
                                       2000     1999      1998          1998        1998
                                     -------   ------  ------------  -----------  ---------
                                                      (pounds  million)
<S>                                   <C>       <C>      <C>           <C>          <C>
Total assets - end of year            10,947    8,905    8,529                      5,826
                                     -------   ------   ------       ----------    -------
Capitalization - end of year
 Long-term debt and other
   obligations, less amounts
   due currently                       4,480    4,539    3,629                      1,976
Minority interest                        258      243      190                          6
Preferred securities of subsidiary
   perpetual trust                        95        -        -                          -
Notes payable to TXU Corp.                 -        -      682                          -
Shareholder's equity                   1,799    1,673    1,535                      1,802
                                     -------   ------   ------       ----------    -------
       Total                           6,632    6,455    6,036                      3,784
                                     -------   ------   ------       ----------    -------
Operating revenues                     4,671    3,753    2,165           425        3,475
Operating income (loss)                  443      543      314           (11)         267

Income before interest*                  517      551      360           (10)         277
Net income (loss)                        120      138       77           (21)         (38)
Net interest expense                     311      284      205            16          126
Ratio of earnings to
   fixed charges                         1.5      1.8      1.5           0.1          1.7

<FN>

  *  Income (loss) before Interest, Income Taxes, Distributions and  Minority
Interest on the face of the Statements of Consolidated Income.

</FN>
</TABLE>


                                A-2

<PAGE>
                     TXU EUROPE LIMITED AND SUBSIDIARIES

                           SELECTED FINANCIAL DATA
                            OPERATING STATISTICS

<TABLE>
<CAPTION>


                                                                     Period From
                                                      Period  From    January 1,
                                      Year Ended       Formation         1998
                                     December 31,       Through        Through
                                  -----------------   December 31,      May 18,
                                    2000      1999       1998            1998
                                  -------   -------  -------------   -----------
<S>                                <C>       <C>         <C>            <C>
SALES VOLUMES
Electric (gigawatt-hours) -
(GWh):
 Industrial and commercial         22,586    19,698      15,459          7,593
 Residential                       17,263    16,726       7,826          6,501
                                  -------   -------     -------        -------
  Total electricity                39,849    36,424      23,285         14,094
                                  =======   =======     =======        =======

Gas (billion cubic feet) -
 (Bcf):
 Industrial and commercial             57        77          51             49
 Residential                           58        49          21              6
                                  -------   -------     -------        -------
  Total gas                           115       126          72             55
                                  =======   =======     =======        =======

Wholesale energy sales:
 Electricity (GWh)                100,132    78,950      51,060         31,122
                                  =======   =======     =======        =======
 Gas (Bcf)                          1,000       447         148             77
                                  =======   =======     =======        =======
Electricity Units
 distributed (GWh)                 33,393    33,120      19,249         13,002
                                  =======   =======     =======        =======

CUSTOMERS (end of period  -
in thousands)
Electric                           4,358     2,931        3,211
Gas                                1,127       805          777

</TABLE>

Information  included herein for the period from January 1, 1998 through  May
18,  1998 has been provided for use with the information for the period  from
Formation to December 31, 1998 to compare revenues on a year on year basis.


                                A-3

<PAGE>

                   TXU EUROPE LIMITED AND SUBSIDIARIES
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS


INTRODUCTION

  The  discussion  below should be read in conjunction with the  consolidated
financial  statements and the related notes of TXU Europe.  TXU Europe  Group
constituted 99% of TXU Europe's assets as of December 31, 2000 and  generated
100% of TXU Europe's operating revenues for the year ended December 31, 2000.
Certain  prior  year  information has been reclassified  to  conform  to  the
current year's presentation.

ACQUISITIONS AND OTHER CHANGES IN THE BUSINESS

  TXU  Europe continually reviews its portfolio of businesses and investments
and  makes adjustments as considered necessary to meet its objectives and  to
maintain  financial  and operational flexibility.  As part  of  this  review,
capital  may  be  redeployed within the energy portfolio to maximize  returns
across Europe.

  On  August  3,  2000,  TXU Europe purchased United Utilities  plc's  retail
energy  supply business, Norweb Energi (a division of Norweb plc)  for  total
consideration,  including  direct costs of the  acquisition,  of  pounds  340
million.   Financing  was  provided through  existing  bank  lines  and  cash
balances on hand.  The transaction also includes the assumption of certain of
Norweb  Energi's obligations, including its power purchase agreements,  which
have been integrated into TXU Europe's energy portfolio.

  The  agreement  for  the  purchase of Norweb Energi included  the  eventual
transfer  of  the  current Norweb plc public electricity supply  license-area
customers (franchise or "in area" customers) and the transfer of Norweb plc's
interest  in the power purchase agreements to TXU Europe Group.   TXU  Europe
Group  expects contracts with Norweb plc public electricity supply  customers
to  be  in  place under the Utilities Bill in early 2001.  Meanwhile,  Norweb
plc's  economic  interest  in  the franchise  customers  and  power  purchase
agreements are effectively passed to Eastern Energy Ltd. (Eastern Energy),  a
subsidiary of TXU Europe Group, through an agency agreement.  Eastern  Energy
acts  as  Norweb plc's agent in meeting all its obligations under its  public
electricity supply license as they relate to the supply of electricity.   All
of  Norweb  plc's  "out-of-area"  electricity  and  all  gas  customers  were
transferred to TXU Europe Group on August 3, 2000.

  The  acquisition of Norweb Energi was accounted for as a purchase  business
combination.  The assets and liabilities of Norweb Energi at the  acquisition
date,  including its power purchase agreements, have been adjusted  to  their
estimated  fair values. The process of determining the fair value  of  assets
and liabilities of Norweb Energi has not been completed.  The latest estimate
of  the excess of the purchase consideration plus acquisition costs over  the
net  fair  value of tangible and identifiable intangible assets acquired  and
liabilities assumed resulted in goodwill of pounds 622 million which is being
amortized  over  20  years.  This amount is subject to  further  revision  as
additional  information becomes available, primarily relating to  exit  costs
and  other liabilities assumed at acquisition. The final determination of the
purchase accounting adjustments requires additional information and analysis,
which  is  ongoing and is expected to be completed within  one  year  of  the
acquisition date. The results of operations of Norweb Energi are reflected in
the  consolidated financial statements of TXU Europe from the August 3,  2000
effective date of the acquisition.

  Also  on  August 3, 2000, TXU Europe announced that its subsidiary, Eastern
Energy,  had  contracted  its customer services  operations  to  Vertex  Data
Science  Limited (Vertex), United Utilities plc's customer services business.
Customer  services include call centers, billing, credit management and  debt
collection.  Eastern  Energy's 1,335 customer services staff  transferred  to
Vertex on September 1, 2000.

      On  January  8, 2001, TXU Europe completed the acquisition  of  51%  of
Stadtwerke  Kiel AG (Kiel AG), a German municipal utility, for  approximately
pounds 145 million. At the date of acquisition, Kiel AG had recorded sterling
equivalent  assets  of  approximately pounds 121million  and  liabilities  of
pounds 82 million.  The process of determining the fair value of tangible and
identifiable intangible assets acquired and liabilities assumed has not  been
completed.

  TXU  Europe  Group  and  EDF  London  Investments  plc,  a  subsidiary   of
Electricite de  France, have created an equally held joint venture  company,
named  "24seven",  for  the management, operation and  maintenance  of  their

                                A-4

<PAGE>

subsidiaries'  respective electricity distribution networks.  The  new  joint
venture  began  operations on April 7, 2000.  TXU  Europe  accounts  for  its
investment  in  24seven by the equity method of accounting.   24seven  serves
over five million electricity customers in London and the eastern counties of
England.  Employees of the joint venturers' subsidiaries, Eastern Electricity
plc  (Eastern Electricity) and London Electricity plc, have been  transferred
to 24seven. The physical distribution system assets, as well as all operating
licenses,  continue to be separately owned by Eastern Electricity and  London
Electricity  plc,  respectively.   (See  Note  2  to  Consolidated  Financial
Statements for a discussion of restructuring and other related costs.)

  On  January  25,  2001, TXU Europe entered into a commitment  to  sell  its
19.2%  interest in Hidroelectrica del Cantabrico, SA (Hidrocantabrico)  to  a
consortium  led  by  Electricidade de Portugal S.A.,  the  Portugese  utility
company,  and  Spanish  savings bank Caja de Ahorro de  Asturias  (Cajastur).
Electricidade de Portugal and Cajastur unconditionally offered euros  24  per
share  for 100% of Hidrocantabrico.  In March 2000, TXU Europe (Espana) S.L.,
a  subsidiary of TXU Europe, announced its intention to make a cash offer  to
acquire  all  of the shares of Hidrocantabrico that TXU Europe did  not  then
own.  Later in March 2000, after a competing bid had been issued, TXU  Europe
announced  that  it  would not pursue its offer.   In  a  series  of  private
transactions  since  that  date,  TXU Europe acquired  additional  shares  in
Hidrocantabrico until it holds approximately 19.2% of the outstanding shares.
TXU  Europe  has pre-emption rights over 4.9% of the stock in Hidrocantabrico
currently  held  by  Electrabel SA (Electrabel), an  electricity  company  in
Belgium,  if  Electrabel elects to sell its interests in  Hidrocantabrico  to
another company during a one year period beginning July 4, 2000.  TXU  Europe
is  subject  to  a  conditional put option by which it  can  be  required  to
purchase the 10% interest in Hidrocantabrico held by Electrabel to the extent
Electrabel  is required to dispose of its holding in Hidrocantabrico  by  the
European  Union or Spanish Competition Authorities during a one  year  period
beginning  July  4,  2000.   The conditions of  this  put  option  include  a
reasonable  notice period before execution.  Results of operations  for  2000
include  approximately pounds 7 million of costs incurred in connection  with
the intended offer for Hidrocantabrico, included in other income - net.

  In  August  2000,  the  Spanish Stock Market Commission  announced  it  was
opening  an  investigation as to whether TXU Europe and Electrabel  acted  in
concert  over share purchases of Hidrocantabrico in order to avoid  making  a
formal  takeover  bid.  TXU Corp. was originally named  as  a  party  but  is
seeking its removal from these proceedings. If the two utilities are found to
be in violation of Spanish securities law, they could face a substantial fine
and  other  restrictions.  The investigation could last until February  2002.
TXU  Europe  is unable to determine what impact there may be, if  any,  as  a
result of the investigation.  TXU Europe and TXU Corp. believe there has been
no  violation of Spanish securities laws and are fully cooperating  with  the
investigation.

  On  March  1,  2000,  TXU Europe Power acquired Nedalo BV  for  pounds  4.5
million, including pounds 2.8 million of goodwill.  This acquisition included
the remaining 25% of Nedalo (UK) Limited it did not already own. Nedalo BV is
a leading manufacturer of small electrical combined heat and power plants.

   In May 2000, TXU Europe sold its metering business in the UK for pounds 36
million  in  proceeds,  realizing a pre-tax gain of approximately  pounds  29
million.  In addition, in August 2000, TXU Europe completed the sale  of  its
interest  in Severomoravska energetika, a.s. (SME), for pounds 51 million  in
proceeds,  realizing a pre-tax gain of approximately pounds 20  million.  The
investment  in  SME  was previously accounted for as an  available  for  sale
marketable  equity  security,  and the amount  of  holding  gains  that  were
previously  recorded in other comprehensive income has been  reclassified  as
realized  gains.  Both of these sales have been recorded in  other  income  -
net.

    On  February  1,  2001, TXU Europe announced it had agreed  to  sell  its
interest in the North Sea gas fields for approximately pounds 138 million  as
a  result  of  its  ongoing review of its program to  reposition  its  energy
portfolio.

  In   November  1999,  TXU  Europe  formed  a  joint  venture  with  certain
shareholders of Pohjolan Voima Oy (PVO), Finland's second largest electricity
generator.  As  part of the transaction, TXU Europe contributed approximately
euros 300 million  (pounds 190 million) for an 81% ownership interest in  the
joint venture company, TXU Nordic Energy. The acquisition of the interest  in
PVO  resulted in goodwill of approximately pounds 37 million which  is  being
amortized  over  40  years.  In  December  1999,  TXU  Europe  completed  the
acquisition  of  an  approximate  40% interest  in  Savon  Voima  Oyj  (SVO),
Finland's  seventh largest electricity distributor, for approximately  pounds

                                A-5

<PAGE>
40  million.   The  agreement includes an option which  allows  the  majority
shareholders  of SVO to require TXU Europe to purchase all  or  some  of  the
remaining  60% interest in SVO.  The option may be exercised at any  time  by
the  majority shareholders and does not expire. TXU Europe accounts  for  its
investment in SVO by the equity method of accounting.

  In  December 1998, TXU Europe disposed of its telecommunications  business,
resulting in a gain of pounds 13 million.  In consideration for the business,
TXU  Europe  received  cash of pounds 60 million and  an  investment  in  the
preferred  stock of the purchaser, NTL Inc.  The investment in the  preferred
stock was sold in 2000 resulting in recognition of a pre-tax gain of pounds 8
million.

    In  December 1999, TXU Europe announced it would import electricity  from
Russia as part of an arrangement between PVO and the Russian national utility
RAO  UES (UES).  The portion of electricity allocated to TXU Europe under the
arrangement  will  be supplied to TXU Nordic Energy.  TXU  Nordic  Energy  is
entitled to 190 MW of the 400MW that will be imported by PVO from UES.  Under
the  arrangement, which began January 1, 2001 and lasts until 2004, UES  will
sell 667 million kilowatt hours (kWh) to PVO in the first year and up to 2.67
billion  kWh each year after 2001.  The electricity will be supplied  through
an electricity complex in Vyborg, a city on the Russian-Finnish border.

  TXU  Europe's  strategy in the United Kingdom (UK) market is  to  rebalance
its  energy  portfolio through retail growth, long term wholesale sales  and,
possibly, physical plant disposal.  TXU Europe continues to review its energy
portfolio  within the UK.  TXU Europe has also announced that it  would  seek
bids  for its UK power assets, in order to evaluate whether their value would
be  maximized through retention or disposal of these assets.  There has  been
no  indication of an impairment of these assets.  No decisions have been made
as to whether disposals will actually take place.

  TXU  Europe  will pursue potential investment opportunities  from  time  to
time when it concludes that such investments are consistent with its business
strategies  and  will  dispose of certain assets  to  allow  redeployment  of
resources into faster growing opportunities in an effort to enhance its long-
term  return.   However,  the  current focus is on  integration  of  recently
acquired  businesses (Norweb Energi and Kiel AG) and selective asset disposal
projects  with no current plans for any additional acquisitions  until  those
projects are complete.


  RESULTS OF OPERATIONS

  The  year  ended December 31, 2000 was a time of continuing change  in  the
competitive  markets in which TXU Europe operates in the UK and the  rest  of
Europe.  The delivery of substantial earnings growth from the Energy business
over  the  last  three years within this environment validates  TXU  Europe's
portfolio  management business model.  This business model involves  the  co-
ordinated  management of a flexible portfolio of physical generation  assets,
contracts  and retail activities in order to create value across  the  entire
energy  chain (from the generation or production of energy ultimately to  the
end delivery to customers).

  Specific initiatives during 2000 included:

  -  Repositioning  of  UK  energy portfolio - TXU  Europe  repositioned  its
electricity   portfolio  through  the  acquisition  of  Norweb   Energi   and
renegotiation of power leasing arrangements which will allow more  efficiency
and flexibility in the use of generation assets.

  -  Expansion  and continued excellence of operations - With the acquisition
of  Norweb  Energi, TXU Europe was the UK's largest electricity supplier  and
second  overall  energy supplier as of December 31, 2000, with  approximately
5.5  million  customer accounts.  Power generation in  the  UK  continues  to
deliver  strong results, good availability and flexibility while  maintaining
high standards of safety and environmental protection.

                                A-6

<PAGE>

  -  Innovation  in  retail  offering and delivery  -  Other  retail  efforts
include  entering  into  an  innovative joint venture  with  Servista.com  to
deliver  a  cost  effective means of acquiring domestic UK customers  in  the
growing  e-commerce,  multi-service market and the  launch  of  the  Staywarm
project,  providing energy to certain targeted groups.  In August  2000,  TXU
Europe  contracted  its UK customer services operation  to  Vertex,  assuring
continued quality service to customers at a reduced cost per customer.

  -  Growth in trading -  TXU Europe has maintained the profitability of  its
gas  operations and successfully expanded its trading position,  establishing
itself  as  the  one  of  the  largest gas traders  in  the  UK  market.   In
continental Europe, central European operations experienced major  growth  in
trading  in  2000 with 97 terrawatt hours (TWh) of power trades  and  60  TWh
equivalent of gas trades compared with four TWh of power trades and  one  TWh
equivalent  of  gas  trades  in 1999.  These portfolio  trading  markets  are
primarily in Germany, the Netherlands, Switzerland and Spain.

  -  Acquisition in Germany -  In Germany, TXU Europe won the bidding  for  a
majority stake in Kiel AG.  The investment provides a platform for growth  in
Europe's largest energy market.

  -  Consolidation  and  growth  in Nordic region  -  In  the  Nordic  region
(primarily  the  countries of Finland, Norway and Sweden),  TXU  Europe  made
progress  in  repositioning the portfolio under its  subsidiary,  TXU  Nordic
Energy, and achieved substantial growth in trading. TXU Nordic Energy is  one
of  the  top  traders in the Nordpool with power trades of 156  TWh  in  2000
compared  with  37 TWh in 1999.  Trading activities have been established  in
the Finnish market and access to Russian electricity has been gained.

    -  Value  creation in Spain - In Spain, TXU Europe holds a 19.2% interest
in  Hidrocantabrico, and TXU Europe has a commitment to sell its interest  to
certain parties.

  In  addition, within the Networks business there was an innovative response
to  challenges presented by the Office of Gas and Electricity Markets (OFGEM)
Distribution Price Review, effective from April 1, 2000, which resulted in  a
28%  cut in the distribution prices that could be charged to customers.   The
joint  venture,  24seven,  was created to provide  distribution  services  to
customers at lower costs.


                                A-7

<PAGE>
REVENUES BY SEGMENT:

  The  following tables set out the revenues by segment of TXU Europe and TXU
Europe Group for the periods indicated:

<TABLE>
<CAPTION>
                                                                             TXU Europe Group
                                               TXU Europe                      (Predecessor)
                                      --------------------------------   -----------------------
                                                                         Period From
                                                          Period  From    January 1,
                                          Year Ended       Formation         1998       Year
                                         December 31,       Through        Through      Ended
                                      -----------------   December 31,      May 18,    March 31,
                                        2000      1999       1998            1998       1998
                                      -------   -------  -------------   -----------  ----------
                                              (pounds  million)
<S>                                    <C>       <C>        <C>             <C>         <C>
Revenues:
  Energy retail                        2,155     2,219       1,346            628       1,655
  Portfolio trading and power          2,349     1,425         746            764       1,337
                                      ------    ------      ------         ------      ------
  Energy - Total                       4,504     3,644       2,092          1,392       2,992
Networks                                 371       429         253            168         414
Other                                     17        18          31             3           69
Inter-segment elimination's             (221)     (338)       (211)            -            -
                                      ------    ------      ------         ------      ------
                                       4,671     3,753       2,165          1,563       3,475
                                      ======    ======      ======         ======      ======
<FN>
* Unaudited
</FN>
</TABLE>


  OPERATING RESULTS

  YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999

  Overview - Net income for 2000 was pounds 120 million compared with  pounds
138 million for 1999.  Included in net income for the 2000 period is pounds 7
million (net of deferred taxes of pounds 3 million) for the cumulative effect
on  periods  prior  to  December  31, 1999 of  a  change  in  the  method  of
depreciating  distribution  system assets from an  accelerated  method  to  a
straight line method. Income before interest, income taxes, distributions and
minority  interest (income before interest) was pounds 517 million  for  2000
compared  with pounds 551 million for 1999.  Revenues of pounds  4.7  billion
for  2000 were up 24% compared with revenues of pounds 3.8 billion for  1999.
The  results for Norweb Energi are included since the August 3, 2000 date  of
acquisition  and  contributed pounds 391 million in revenues  and  pounds  34
million in income before interest.

  TXU  Europe's results for 2000 included costs of  pounds 79 million (pounds
55  million after-tax), mostly for restructuring charges associated with  the
creation  of  the 24seven joint venture, for the contracting of  the  Eastern
Energy   customer   service  function  to  Vertex   and   for   other   staff
reorganizations, and pounds 7 million for costs associated with the offer for
Hidrocantabrico.  Partially offsetting this was a gain of pounds  29  million
(pounds  21  million  after-tax)  from the sale  of  the  metering  business.
Results  for  2000 also benefited from other portfolio adjustments  including
the  pounds 20 million (pounds 14 million after-tax) gain on the sale of  TXU
Europe's interest in SME.   The results for 2000 also reflect a reduction  in
depreciation  expense of approximately pounds 22 million (pounds  16  million
after-tax) resulting from the application of the new depreciation method  and
change in the estimated lives of distribution system assets.  (See Note 3  to
Consolidated Financial Statements.)


                                A-8

<PAGE>
  The  overall decrease in income before interest for 2000 primarily reflects
the  adverse  effects  of the OFGEM Distribution Price Review,  which  became
effective  from April 1, 2000, difficult UK wholesale market conditions,  and
the  impact  of restructuring charges. In the UK, these effects  have  mostly
been  mitigated by the acquisition of Norweb Energi to increase the  customer
base,  operating  cost savings from the creation of 24seven, contracting  out
customer services to Vertex and the benefits of previous years' actions,  and
the restructuring and repositioning of the UK portfolio.  Other ongoing steps
taken  include:  increased  retail marketing  efforts;  continued  review  of
selective  disposal  of  assets; and continued cost  reduction  programs  and
organizational  changes  in  the UK aimed at lowering  operating  costs.  The
selective  sale of various assets, including the investment in  SME  and  the
metering   business  in  2000,  maximize  value  as  part  of  the  continued
restructuring   of  TXU  Europe's  portfolio  of  energy   activities.    The
restructuring  of  the  energy  portfolio continued  with  the  January  2001
commitment for the sale of TXU Europe's interest in Hidrocantabrico  and  the
February  1, 2001 announcement of the sale of North Sea gas assets.   Further
disposals  are  expected in the first half of 2001.  The decrease  in  income
before interest for 2000 from UK and other operations was also offset by  the
strong  performance  from  continental  European  operations,  in  particular
increased  energy trading activities in the merchant energy  business.   (See
Portfolio trading and power segment discussion below.)

  Excluding  the pounds 72 million of restructuring costs included  in  2000,
operating  and  maintenance expenses were pounds 622  million  compared  with
pounds  706 million for 1999.  The reduction from the comparable 1999 amounts
reflects  the  underlying benefits of staff reorganizations  and  other  exit
costs  and  on-going cost savings programs throughout TXU  Europe,  partially
offset by the inclusion of Norweb Energi.

  Depreciation  expense  for future periods should be lower  than  comparable
1999  periods as a result of the change in depreciation method and change  in
estimated  lives  adopted as of the beginning of 2000 on distribution  system
assets. The straight line method has been implemented to better recognize the
cost  of  the  assets over the anticipated useful life of the  assets.  As  a
result  of  the  acquisition of Norweb Energi, amortization  of  goodwill  is
expected to be slightly higher in future periods.

  Other income - net for 2000 of pounds 74 million is comprised primarily  of
the  gains  from the sale of certain assets and other investments,  including
the  sale of the metering business and the sale of the portfolio interest  in
SME,  aggregating  pounds 65 million pre-tax (pounds 46  million  after-tax).
Other  gain  transactions, equity in earnings of joint ventures and  dividend
income  from  other  investments, reduced by the pounds 7  million  in  costs
associated   with   the  intended  offer  for  Hidrocantabrico,   were   also
contributing factors.

  Interest expense for 2000 was higher than for 1999 primarily due to  higher
variable interest rates and a higher level of debt.

  Total  income  tax  expense of TXU Europe for 2000 was  pounds  70  million
compared  with pounds 111 million for 1999.  The effective tax rate  in  both
periods  is  affected  by amortization of goodwill and  other  non-deductible
items  primarily related to a capital lease. The effective tax rate  in  2000
also  reflects  pounds  18  million in respect of  favorable  resolutions  of
certain matters relating to prior years tax matters.

  The  2000  period  includes  pounds  8 million  in  charges  for  quarterly
distributions on the preferred securities issued by TXU Europe Capital  I  in
March 2000.

  See  Note  18  to  Consolidated  Financial Statements  for  information  on
revenues and income before interest by operating segment.

  Energy  retail  -Revenues for both 2000 and 1999 were approximately  pounds
2.2  billion. The amount for 2000 reflects the addition of customers from the
Norweb Energi business offset by a reduction in revenues from other customers
of Eastern Energy.  Norweb Energi business contributed revenues of pounds 391
million since acquisition in August 2000. The decrease in the Eastern  Energy
business  is  due  to  a  reduction in customers in the  residential  market,

                                A-9

<PAGE>
reflecting intense competition, and to lower electricity volumes sold in  the
industrial  and  commercial  markets as part of a  focus  on  retaining  more
profitable customers and selling volumes in the wholesale market at  stronger
prices.    Customer  retention  improved  during  2000  and   new   marketing
initiatives  are  underway to achieve better results in the future,  such  as
investing  in an e-commerce business in order to attract customers  and  sell
electricity over the internet.  In December 2000, TXU Europe Group acquired a
20%  interest  in  Servista.com Limited, an on-line provider  of  energy  and
communications services. TXU Europe Group will be the sole supplier of energy
sold under the Servista.com brand for an initial period of five years.

  Income before interest for 2000 was pounds 78 million compared with a  loss
of pounds 25 million for 1999.  The increase from the prior year includes the
contribution  from  the  Norweb Energi business  (pounds  34  million).   The
remaining  improvement  is  attributable  to  the  Eastern  Energy   business
primarily due to a change in the basis of calculating the prices charged  for
the  intracompany transfer of electricity and gas from the portfolio  trading
and  power  segment  (pounds 83 million), favorable  price  and  cost  margin
variances (pounds 19 million) and operating cost savings (pounds 14 million),
partially  offset  by  adverse variances due to  the  decrease  in  customers
(pounds 28 million) and restructuring charges (pounds 19 million).

  TXU  Europe may vary the basis of transfer pricing (i.e. prices charged for
energy  from  the  portfolio trading and power segment to the  energy  retail
segment)  to  reflect changes in markets, prices and other  current  economic
conditions.

  Portfolio  trading  and power - Revenues for 2000 were pounds  2.3  billion
compared   with  pounds  1.4  billion  for  1999.  The  increase  is   mainly
attributable  to  the  expansion  of merchant  energy  (trading)  operations.
Wholesale  electricity and gas activity for 2000 has increased substantially,
up  27%  and 124%, respectively, from the same period of 1999 (shown  in  the
operating  statistics  table above).  Owing to  the  nature  of  the  trading
activity  and  the  instruments involved, the increase  in  revenues  is  not
directly  proportional to the increase in wholesale energy volumes,  as  such
revenues are recognized on a margin basis.

  Income  before  interest  for 2000 was pounds  263  million  compared  with
pounds 409 million for 1999. The decrease in income is primarily due to lower
margins on UK wholesale sales of gas and electricity partially offset  by  an
increase  in  contribution  from  trading operations  in  continental  Europe
(pounds  92  million net), the change in the basis of calculating the  prices
charged  to  the  Energy  Retail  segment for the  intracompany  transfer  of
electricity and gas (pounds 83 million) and restructuring charges  (pounds  9
million). Operating cost savings (pounds 24 million) and the gain on disposal
of certain land assets (pounds 14 million) were partially offsetting.

  Within  continental Europe, income before interest from  Nordic  operations
in  2000 rose pounds 14 million over 1999 while energy trading in the rest of
Europe, primarily Germany, rose pounds 4 million during 2000.  Energy trading
operations in continental Europe are accounted for on a mark-to-market basis.
In  its  first full year of operation, TXU Europe's Geneva office traded  157
TWh  of  power in 2000 while the Nordic operations traded 156 TWh. TXU Europe
also  became one of the first foreign companies to gain control of  a  German
stadtwerke (local utility) with its purchase in January 2001 of 51%  of  Kiel
AG.   The  operations  in  Kiel AG will complement  TXU  Europe's  increasing
trading activity on the German exchanges.

  Networks  - Revenues were pounds 371 million for 2000 compared with  pounds
429  million for 1999. The decrease primarily reflects the adverse impact  of
the  OFGEM Distribution Price Controls, which became effective April 1, 2000,
partially offset by higher unit sales in 2000 compared with 1999.

  Income  before  interest  for 2000 was pounds  150  million  compared  with
pounds  175 million for 1999. The decrease is due primarily to the  reduction
in  revenues as a result of the impact of the Distribution Price Controls  on
rates that can be charged to customers, offset by savings on operating costs.
Operating  cost  savings  include  the  reduction  in  depreciation   expense
following the adoption of the new depreciation method and change in estimated
asset  lives, as well as cost savings which have arisen because  of  the  new
cost structure following the implementation of the joint venture, 24seven.


                                A-10

<PAGE>
  Other  -  Income before interest from other business operations was  pounds
56  million  for 2000 compared with pounds 4 million for 1999.  The  increase
primarily reflects the disposal of the metering business and the sale of  TXU
Europe's portfolio investment in SME.

  Unallocated corporate costs include amortization of goodwill and, in  2000,
restructuring  costs  incurred, net of aggregate  gains  on  sales  of  other
investments and other gain transactions.

  YEAR ENDED DECEMBER 31, 1999 COMPARED WITH PERIOD ENDED DECEMBER 31, 1998

  Revenues

  The  business operations of TXU Europe Group were not significantly changed
as  a  result  of  the purchase of TEG by a subsidiary of  TXU  Europe.   For
purposes  of the discussion of operating revenues for the year ended December
31,  1999 compared with the year ended December 31, 1998, the revenues of TXU
Europe  Group for the period from January 1, 1998 through May 18,  1998  have
been  combined with the revenues of TXU Europe for the period  from  May  19,
1998 through December 31, 1998.

  Energy  retail - Revenues from the energy retail operations for  1999  were
pounds  2.2  billion compared with revenues for 1998 of pounds  1.6  billion.
Volumes  in the gas residential market increased in 1999 as a result of  this
market being fully opened to competition.  Electricity volumes decreased  due
to  the  loss  of  industrial and commercial customers in  the  October  1999
contract  round  (the  period  of renegotiation  of  significant  numbers  of
contracts) and loss of customers in the ex-franchise market.  Prices  in  the
industrial and commercial sector, however, have improved.  In December  1999,
TXU Europe Group's volume in this market decreased as a result of a policy to
accept business on a more selective basis.

  Portfolio  trading  and  power - Revenues from the  Portfolio  trading  and
power  operations in 1999 were pounds 1.4 billion compared  with  pounds  0.9
billion  for  1998.   Increased operating volumes in the gas  portfolio  have
increased  revenue  partially  offset by lower revenues  in  the  electricity
portfolio due to lower time-weighted Pool purchase prices (weighted for  time
of day sales) and reduced volumes.

  Networks  -  Revenues from the networks business for 1999 were  pounds  429
million compared with pounds 306 million for 1998.  Units distributed in 1999
increased  by  approximately  3%  from 1998 and  regulated  prices  increased
slightly from April 1999.

  Other  -  Other revenues were pounds 18 million in 1999, relating primarily
to the metering business.  In 1998, other revenues were pounds 37 million and
included,   in   addition   to   metering   revenues,   revenues   from   the
telecommunications business which was sold in December 1998 and revenues from
the  modular building business operated by Rollalong Limited, which was  sold
in February 1999.

Income before interest

  The  post-acquisition  results of TXU Europe include  the  results  of  TXU
Europe Group plus purchase accounting adjustments and financing costs of  the
acquisition.

  Income  before  interest  of  TXU Europe for 1999  of  pounds  551  million
consisted  of  pounds 3.8 billion of operating revenues offset by  costs  and
expenses  of  pounds  3.2  billion.   Costs  and  expenses  included   pounds
2.2  billion for energy purchased for resale and fuel consumed,   pounds  706
million  for  operation  and  maintenance  expense,  pounds  87  million  for
amortization  of goodwill and pounds 173 million for depreciation  and  other
amortization.  There was pounds 8 million of other income.

  Income  before  interest of TXU Europe for the 1998 period was  pounds  360
million  and consisted of pounds 2.2 billion of operating revenues offset  by
costs  and  expenses  of pounds 1.9 billion and other  income  of  pounds  46
million.   These results include the operations of TXU Europe Group from  May
19,  1998.   Costs  and  expenses  included pounds  1.3  billion  for  energy

                                A-11

<PAGE>
purchased  for resale and fuel consumed pounds 379 million for operation  and
maintenance   expense,   pounds  92  million  for  depreciation   and   other
amortization and pounds 52 million for amortization of goodwill.

Net interest expense

  Net  interest expense of TXU Europe for 1999 of pounds 284 million included
interest expense of pounds 347 million offset by interest income of pounds 63
million.  Interest expense included pounds 64 million in respect of  sterling
denominated Eurobonds and pounds 49 million in respect of the rent  factoring
financing  arrangement  for leased power stations, as  well  as  payments  of
pounds  51  million under the Sterling Credit Agreement,  pounds  35  million
under  the  Senior  Notes and pounds 19 million on the note  payable  to  TXU
Corp., which was paid off in June 1999.

  Net  interest  expense  of TXU Europe for the 1998  period  of  pounds  205
million  included interest expense of pounds 269 million offset  by  interest
income  of  pounds  64 million on cash balances.  Interest  expense  included
payments of pounds 74 million under the Sterling Credit Agreement, pounds  40
million  in  respect of sterling-denominated Eurobonds, pounds 38 million  in
respect  of  the rent factoring financing arrangement as well  as  pounds  33
million on the note payable to TXU Corp.

Total tax expense

  Total  tax expense of TXU Europe for the year ended December 31,  1999  was
pounds 111 million.  Total tax expense of TXU Europe for the 1998 period  was
pounds  67  million. The effective tax rate for both periods was affected  by
non-deductible  expenses  related  to  capital  leases  and  amortization  of
goodwill.   The  1998  period also reflected a tax benefit  of  approximately
pounds 8 million associated with a 1% reduction in the statutory tax rate and
included income that was taxed at rates less than the statutory rate.

PERIOD FROM APRIL 1, 1998 THROUGH MAY 18, 1998 (PREDECESSOR)

  TXU  Europe Group incurred a loss before interest for the period from April
1,  1998  through May 18, 1998 of pounds 10 million consisting of pounds  425
million  of  operating revenues offset by costs and expenses  of  pounds  436
million  and  other income of pounds 1 million.  Costs and expenses  included
pounds  287 million for energy purchased for resale and fuel consumed, pounds
123  million for operation and maintenance expense and pounds 26 million  for
depreciation and amortization.

  Net  interest expense of TXU Europe Group for the period from April 1, 1998
through May 18, 1998 of pounds 16 million included interest expense of pounds
28  million offset by interest income of pounds 12 million on cash  balances.
Total  tax  benefit  of TXU Europe Group for the period from  April  1,  1998
through May 18, 1998 was pounds 5 million.

REGULATORY ISSUES

  The  regulation of distribution and supply charges is currently subject  to
review by OFGEM.

    Networks - In December 1999, OFGEM issued the Distribution Price  Control
Review report proposing a range of substantial net revenue reductions for the
distribution businesses of all regional electricity companies in the UK.  The
final proposals for Eastern Electricity incorporated an initial reduction  in
allowed  revenues for regulated units of 28% from April 1, 2000 with  further
annual  reductions  of  3%  per year for the next four  years,  adjusted  for
inflation.   The  effect on revenues was a reduction of  pounds  65  million,
adjusted for inflation in 2000 and is estimated to be a further reduction  of
about  pounds  30  million in 2001.  In April 2000, the Director  General  of
Electricity  Supply  (DGES)  established a new basis  for  the  revenues  TXU
Europe's distribution business is allowed to receive.

  In  April  2000,  following the Distribution Price  Control  Review,  OFGEM
initiated a new review known as the Information and Incentives Project.  This
project  was  described  in  the final proposals of  the  Distribution  Price
Control  Review.   This  project is intended to increase  the  incentives  on
companies to improve quality of service and reduce the uncertainty around the
price  control  review process.  It is intended that an  incentive  framework
rewarding or penalizing companies by up to 2% of revenue, based on a  measure
of network performance, will be introduced beginning April 2002.

                                A-12

<PAGE>

  Energy  Retail  -  Under  regulatory arrangements,  supply  price  controls
became effective on April 1, 2000. The scope of the controls has been reduced
to  remove  all small businesses and some residential customers  from  direct
price  controls. TXU Europe Group's directly controlled tariffs were  reduced
by  an  average  of 7.1% from April 1, 2000 as required by the new  controls,
resulting  in  an  estimated  reduction in annual revenues  of  approximately
pounds  15  million.  As the market is opened further to competition,  it  is
expected  that  price  restraints  will no  longer  be  applied  to  domestic
customers.  The DGES has indicated that he hopes to be able to  remove  price
controls effective April 1, 2002.

    New  Electricity Trading Arrangements (NETA) - Following a  comprehensive
reassessment  of  the timetable for completion of all the necessary  testing,
the  implementation of NETA is now scheduled to commence on March  27,  2001,
although  the  date may be revised before then based on the progress  in  the
ability  of  participants  to  communicate with  the  central  systems  being
installed and other concerns.  Under NETA, for those companies wishing to buy
and  sell  electricity, the arrangements provide the freedom  to  enter  into
directly  negotiated contracts instead of having to trade through  a  central
electricity  pool.   It  is  expected that under the  new  arrangements  bulk
electricity will be traded on one or more exchanges and through a variety  of
bilateral  and  multilateral  contracts and  that  market  participants  will
include  not  only  generators and suppliers but also traders  with  physical
positions,  i.e.  energy wholesalers; accordingly, NETA  implementation  will
eliminate  the Pool. The new arrangements provide mechanisms for  near  real-
time  clearing and settlement of differences between contractual and physical
positions  of those buying, selling, producing and consuming electricity.   A
balancing  mechanism will enable the system operator (National Grid  Company)
to  change levels of generation and demand to near real-time; and a mechanism
for  imbalance  settlement will provide for the settling of  the  differences
between net physical and net contractual position of parties.

  Electricity supply businesses have incurred significant costs to  introduce
and  operate under NETA, while the financial impact on distributors has  been
minimal.  Although the UK government proposes that such costs will ultimately
be  borne by customers, OFGEM has not allowed recovery of such costs  in  the
price controls which became effective on April 1, 2000.  TXU Europe's ability
to  manage  its  purchase  price risk depends, in  part,  on  the  continuing
availability of properly priced risk management mechanisms such as  contracts
for  differences  and electricity forward agreements.  No  assurance  can  be
given that an adequate, transparent market for such products will in fact  be
available in the future (including NETA).

  TXU  Europe  is  unable  to  determine,  at  this  time,  what  impact  the
implementation  of  NETA  will  have on its financial  position,  results  of
operations or cash flows.

  Utilities  Act  -  The  Utilities Act 2000 (Utilities Act)  received  Royal
Assent  (necessary for enactment) on July 28, 2000 and will become  effective
in April 2001. The goals of the Utilities Act are to place consumer interests
at  the  core  of regulation and to harmonize gas and electricity regulation.
The  Utilities  Act  makes  changes  to the  electricity  and  gas  licensing
framework, but for the most part license obligations will be carried over  as
appropriate and will be largely unchanged from those in present licenses.  In
addition, the regulators of gas and electricity markets are combined  into  a
single  regulatory  body,  the  Gas and Electricity  Markets  Authority  (the
Authority),  which  consists  of a Chairman  and  Members  appointed  by  the
Secretary of State for Trade and Industry, and is supported by OFGEM.

LIQUIDITY AND CAPITAL RESOURCES

YEAR ENDED DECEMBER 31, 2000 AND YEAR ENDED DECEMBER 31, 1999 OF TXU EUROPE.

  Net  cash generated by operating activities was pounds 507 million for 2000
compared  with pounds 417 million for 1999.  Changes in operating assets  and
liabilities  provided  pounds 108 million for 2000 compared  with  pounds  88
million  used  for  1999.  The amount for 1999 includes pounds  255  million,
representing  the sale of accounts receivables under a receivables  financing
program  revised in March 1999, that previously had used the  receivables  as

                                A-13

<PAGE>
collateral  on  short-term  borrowings.  Cash  flows  provided  by  operating
activities before changes in operating assets and liabilities were pounds 399
million for 2000 and pounds 505 million for 1999.

  Cash  used in investing activities was pounds 581 million for 2000 compared
with  pounds  686  million  for 1999. Acquisitions of  businesses  (primarily
Norweb  Energi)  were pounds 319 million in 2000. Capital  expenditures  were
pounds  229 million for 2000 compared with pounds 385 million for 1999.  Cash
used  for  other investments in 2000 of pounds 238 million primarily reflects
the purchase of additional shares in Hidrocantabrico.  The pounds 282 million
invested  in  1999 was primarily for the investments in PVO and  SVO  in  the
Nordic  markets.   Proceeds from the sales of assets and  other  investments,
partly  from  TXU  Europe's repositioning of its portfolio, were  pounds  137
million  for 2000.  Most of this came from the sales of the metering business
(pounds  36 million), the investment in SME (pounds 51 million) and the  sale
of other investments (pounds 50 million).

  Cash  provided  by  financing activities for 2000 was  pounds  452  million
compared  with  pounds  88  million  for  1999.   For  2000,  long-term  debt
borrowings  were  pounds 1.4 billion and repayments of  long-term  debt  were
pounds  1.1  billion (primarily to pay down the Tranche B borrowings).   (See
table  below  for  details.)  In addition, there was  pounds  95  million  of
Preferred Securities of Subsidiary Perpetual Trust issued in March 2000.  For
1999, borrowings of long-term debt were approximately pounds 2.4 billion  and
repayments  were approximately pounds 1.5 billion, reflecting the refinancing
of  the original TXU Corp. acquisition financing.  For 2000, changes in notes
payable  -  banks and other short-term loans, including changes in receivable
securitization,  provided  pounds 103 million  compared  with  repayments  of
pounds 102 million in 1999.

YEAR  ENDED DECEMBER 31, 1999 AND PERIOD FROM FORMATION THROUGH DECEMBER  31,
1998 OF TXU EUROPE

  Net  cash  generated by operating activities of TXU Europe was  pounds  417
million  for  1999 and pounds 37 million for the 1998 period.  Cash  used  by
changes in operating assets and liabilities of TXU Europe for 1999 was pounds
88  million and for the 1998 period was pounds 199 million.  Cash flows  from
operations before changes in operating assets and liabilities were pounds 505
million for 1999 and pounds 236 million for the 1998 period.

  Cash used in investing activities of TXU Europe was pounds 686 million  for
1999  and pounds 1.8 billion for the 1998 period.  The amount for TXU  Europe
for  the  1998 period includes pounds 1.4 billion representing the  net  cash
paid  to acquire TEG.  Capital expenditures were pounds 385 million for 1999,
which  included approximately pounds 110 million for the acquisition  of  gas
assets, and were pounds 207 million for the 1998 period.  In 1999, pounds 282
million   was   invested  primarily  in  other  European  assets,   primarily
investments in PVO and SVO in the Nordic market.

  For  1999,  cash provided by financing activities by TXU Europe was  pounds
88  million.   This included borrowings of pounds 2.4 billion in  lower  rate
long-term  debt, which was used in part to refinance most of  the  borrowings
related  to  the acquisition of TEG.  The securitization of receivables  also
provided cash.  Cash provided by financing activities of TXU Europe  for  the
1998 period was pounds 2.2 billion including common stock issued to parent of
pounds  1.5 billion and borrowings under the acquisition facility  of  pounds
1.8 billion.

PERIOD  FROM  APRIL  1,  1998  THROUGH MAY  18,  1998  OF  TXU  EUROPE  GROUP
    (PREDECESSOR)

  Net  cash generated by operating activities of TXU Europe Group was  pounds
74  million  for  the period from April 1, 1998 through May 18,  1998.   Cash
provided  by changes in operating assets and liabilities of TXU Europe  Group
was  pounds 76 million.  Cash used by operations before changes in  operating
assets and liabilities of TXU Europe Group was pounds 2 million.

  Cash  used  in  investing  activities of TXU Europe  Group  was  pounds  78
million  and  capital expenditures were pounds 51 million. Cash  provided  by
financing activities of TXU Europe Group was pounds 16 million.

                                A-14

<PAGE>

FINANCING ARRANGEMENTS

  Details concerning changes in long-term debt are presented below:

<TABLE>
<CAPTION>

                                                    Successor                 Predecessor
                                          ---------------------------------  -------------
                                                                   Period     Period from
                                                                    From        April 1,
                                             Year Ended          Formation       1998
                                             December 31,          Through       Through
                                          --------------------   December 31,    May 18,
                                           2000       1999          1998          1998
                                          -------    --------     --------      -------
                                               (pounds  million)
<S>                                        <C>        <C>          <C>            <C>
Borrowings under the:
Sterling Credit Facility - Term Facility        -        750           -            -
Sterling Credit Facility - Tranche B:
   Norwegian Kroner (NOK)                      53        124           -            -
  Spanish pesatas                               -         51           -            -
   Pounds  sterling                           115        133           -            -
   Euro's                                     362        257           -            -
Senior Notes                                    -        921           -            -
EMTN program - Notes:
    7.25% due 2007                             50          -           -            -
    7.25% due 2030                            275          -           -            -
    6.88% due 2001                            100          -           -            -
35 PUT 5 Resettable Notes due 2035            301          -           -            -
Acquisition facility                            -          -       1,821            -
Interim facility                                -          -         243            -
Other long-term debt                           94        187          66            -
                                           ------     ------      ------        ------
Total  borrowings                           1,350      2,423       2,130            -
                                           ------     ------      ------        ------

Retirements of :
Sterling Credit Facility - Tranche B         (568)      (316)          -            -
EMTN program - Notes                          (50)         -           -            -
Acquisition facility                            -       (750)     (1,071)           -
Interim facility                                -          -        (243)           -
Loan notes                                      -        (48)         (9)           -
Other long-term debt                         (459)      (415)       (174)           -
                                           ------     ------      ------        ------
Total retirements                          (1,077)    (1,529)     (1,497)           -
                                           ------     ------      ------        ------
</TABLE>

    On  March  2, 2000, TXU Europe Capital I, a perpetual statutory  business
trust,  established  as  a financing subsidiary for  TXU  Europe,  issued  to
investors  US$150  million (pounds 95 million) of  9  3/4%  Trust  Originated
Preferred  Securities  (Trust Securities), in approximately  6,000,000  units
with  a  liquidation  preference  of  US$25  per  unit.    (See  Note  9   to
Consolidated Financial Statements.)

  At  December 31, 2000, TXU Europe has a euros 2.0 billion Euro Medium  Term
Note (EMTN) program, under which TXU Europe may from time to time issue notes
in  various currencies.  On November 30, 2000, a financing subsidiary of  TXU
Europe  issued  pounds  301  million of 35 Put 5 Resettable  Notes  due  2035
(Resettable Notes) under the EMTN program.  The net proceeds were used to pay
down  pounds 50 million of EMTN Notes due 2007 with the remainder being  held
at year end December 31, 2000, to finance the repayment of the rent factoring
agreement  in  January  2001 and for other corporate  purposes.  The  initial
interest rate on the Resettable Notes, up to the first reset date of November
30,  2005, is 7.7875%.  The issuer of the Resettable Notes has a call  option
to  repurchase the Resettable Notes at par on November 30, 2005.   This  call
option  has  been  assigned  to  commercial  banks  for  a  consideration  of
approximately pounds 5 million per annum for five years. The Resettable Notes

                                A-15

<PAGE>
also include a put option that is exercisable at 5 years by the holder and  a
reset feature that permits the holder to remarket the Resettable Notes  at  a
different interest rate if the put is not exercised.  On the reset date,  the
new  interest  rate will be determined in accordance with the  terms  of  the
Resettable  Notes for the next 6 to 20 years.  The Resettable  Notes  can  be
redeemed at principal plus accrued interest on November 30, 2005.

  Prior  to the acquisition of TEG by TXU Corp. in 1998, certain subsidiaries
of  TXU Europe entered into an agreement with commercial banks whereby future
intra-group rental payments receivable were assigned to these banks in return
for  a sum of pounds 1,097 million.  As of December 31, 2000, the balance  of
the  rental payments due to the banks was pounds 190 million, which was fully
paid in January 2001.

 See  Notes 7 and 8 to Consolidated Financial Statements for more information
concerning available sources of short-term and long-term financing.

  On  January  8, 2001, in connection with the acquisition of  Kiel  AG,  TXU
Europe borrowed an additional euros 229 million (pounds 145 million) at 5.54%
per annum (euros 47 million (pounds 30 million) under Tranche B and euros 182
million (pounds 115 million) under the 364-day facility).  An additional  NOK
50  million  (pounds 4 million) was borrowed under Tranche B on  January  15,
2001.

ANTICIPATED CAPITAL COMMITMENTS

  TXU  Europe Group received government consent to build a 215 megawatt  (MW)
combined  heat and power plant for Shotton Combined Heat and Power for  which
there  was a total commitment of pounds 143 million. As of December 31, 2000,
outstanding  drawings  under  the project finance  facility  were  pounds  85
million. The remainder is due in 2001 when the station is due to be completed
during the third quarter.  Repayment on the loan begins six months after  the
earlier  of  the completion date or November 15, 2001 and will continue  over
the  next 15 years.  Estimated capital expenditures on environmental  control
facilities  are pounds 43 million in 2000, pounds 50 million in 2001,  pounds
40  million  in  2002,  and  pounds 35 million in  2003.   (See  Note  16  to
Consolidated   Financial   Statements  for   a   discussion   of   additional
commitments.)

RESTRUCTURING AND OTHER EXIT COSTS

  During  2000, TXU Europe recorded restructuring charges and other costs  of
approximately  pounds 79 million pre-tax (pounds 55 million  after-tax).   Of
this  amount,  pounds  72 million pre-tax (pounds 50  million  after-tax)  of
restructuring costs were charged to operation and maintenance expense and the
remainder was charged to depreciation expense.

  The  restructuring  costs were primarily a result of the  creation  of  the
24seven  joint  venture  and for certain other staff reorganizations.  As  of
December  31,  2000,  TXU  Europe had recorded pre-tax  redundancy  costs  of
approximately  pounds  35  million related to termination  benefits  for  958
employees  that  have  accepted the benefits.   In  addition,  other  pre-tax
restructuring charges consisted of pounds 16 million of asset writedowns  and
pounds  28  million of other exit costs.  Further restructuring  charges  are
expected  to be incurred through the end of 2001.  As of December  31,  2000,
pounds  32  million of redundancy costs and pounds 11 million of  other  exit
costs  charged during the year then ended have been paid. Separate redundancy
costs  associated with the termination benefits of employees of the  recently
acquired  Norweb  Energi  were  included  as  liabilities  assumed   in   the
acquisition. (See Note 1 to Consolidated Financial Statements.)

CUSTOMER ACQUISITION COSTS

  Beginning  in  1998,  TXU  Europe  Group paid  commissions  to  agents  who
assisted  TXU  Europe Group in acquiring customers in the  newly  deregulated
electricity and gas markets.  Those costs of acquiring customers were charged
to  expense when incurred, although revenues from the acquired customer  base
are expected to be received over several years.  Total charges for the period
from Formation through December 31, 1998 were pounds 38 million, and for 2000
and  1999  were  pounds 13 million and pounds 9 million,  respectively.   TXU
Europe  Group  expects that it will continue to incur some similar  costs  in
connection with its ongoing efforts to acquire customers.

                                A-16

<PAGE>
  TXU  Europe Group is seeking new ways to access the energy markets  and  to
form more partnerships with the objective of reducing costs, improving access
to customers and capitalizing on emerging new markets like the Internet.

  In  2000,  TXU  Europe  Group entered into a direct  advertising  campaign,
related  to  the introduction of the StayWarm project, to attract a  targeted
group  of  customers.   Costs  of this program of  approximately  pounds  1.3
million  of direct response advertising costs were capitalized and are  being
amortized  over  a period of three years.  Additional marketing,  advertising
and sales promotion costs for this project of pounds 1.5 million was expensed
as incurred.

EUROPEAN MONETARY UNION (EMU)

  Most  of  TXU  Europe  Group's income and expenditures are  denominated  in
pounds   sterling  or  in  the currencies of other countries.   Most  of  the
trading operations in continental Europe, however, are denominated in euro's.
TXU  Europe's accounting systems have been able to deal with the  receipt  of
payments  in  Euros effective from January 1, 1999.  During 2000,  there  was
substantial  volatility in the exchange rate between the Euro and  the  pound
sterling, but by the end of the year the exchange rate was close to  what  it
had been at the beginning of the year and there was little overall effect.

EFFECT OF INFLATION

  Inflation in the UK and continental Europe was at a low level in  1999  and
2000,  and  therefore inflation did not have a material impact on results  of
operations for the periods presented.

CHANGES IN ACCOUNTING STANDARDS

  New  accounting  standards  - Statement of Financial  Accounting  Standards
(SFAS)   No.   133,  "Accounting  for  Derivative  Instruments  and   Hedging
Activities", as extended by SFAS No. 137 (June 1999) and amended by SFAS  No.
138 (June 2000), is effective for TXU Europe beginning January 1, 2001.  SFAS
No.  133  establishes  accounting  and  reporting  standards  for  derivative
instruments,  including  certain derivative  instruments  embedded  in  other
contracts,  and  for  hedging  activities.  It requires  the  recognition  of
derivatives in the balance sheet and the measurement of those instruments  at
fair value.

  All  derivatives  within TXU Europe have been identified pursuant  to  SFAS
No.  133  requirements.  TXU Europe has designated, documented  and  assessed
derivative  hedging relationships.  The majority of those derivative  hedging
relationships  are  cash-flow hedges that require TXU Europe  to  record  the
derivative  assets  or liabilities at their fair value on its  balance  sheet
with  an  offset in other comprehensive income.  Future hedge ineffectiveness
will be recorded in earnings.

  Certain  of  TXU  Europe's  derivatives relate to its  trading  activities,
which, for the most part, are not affected by the implementation of SFAS  No.
133.   TXU Europe accounts for such trading activities globally on a mark-to-
market basis.

  Ongoing  implementation issues currently being addressed by the Derivatives
Implementation Group (DIG) may affect the application of SFAS  No.  133.   In
its  normal  course of business, TXU Europe enters into commodity  contracts,
which  include "swing" components for additional purchases or  sales  of  the
underlying  commodity.  These  contracts are  used  by  TXU  Europe  and  its
customers  to provide some of their commodity requirements.  TXU  Europe  has
evaluated  these contracts and determined that they qualify  for  the  normal
purchases and sales exception provided by SFAS No. 133.  In October 2000, the
DIG  reached  a  tentative  conclusion that  option  contracts,  which  could
potentially  include these commodity "swing" contracts, do  not  qualify  for
such  exception.   If  the  FASB  approves this tentative  conclusion,  these
contracts  would  be  required  to  be accounted  for  as  derivatives.   DIG
conclusions are required to be prospectively applied only after FASB approval.

                                A-17

<PAGE>

  Adoption of this accounting standard as of January 1, 2001 resulted in  the
recognition  of  pounds 173 million of derivatives as assets and  pounds  231
million  of derivatives as liabilities with a cumulative effect of pounds  41
million after-tax as an decrease to other comprehensive income. TXU Europe is
unable  to  determine  the precise impact related to the commodity  contracts
discussed  above until such time as the FASB has approved the  DIG  tentative
conclusion  and TXU Europe has had time to evaluate the effect.   TXU  Europe
estimates  that  the tentative conclusion would increase other  comprehensive
income at January 1, 2001 by  pounds 15 million after-tax.

  There are a number of issues pending before the DIG that may have an impact
on the application of this statement. Management is unable to predict the
outcome of these issues.

  SFAS  No.  140, "Accounting for Transfer and Servicing of Financial  Assets
and  Extinguishments  of  Liabilities",  is  effective  for  TXU  Europe  for
transfers  on  or after April 2, 2001.  SFAS No. 140 replaces SFAS  No.  125.
SFAS  No.  140  revises the standards for accounting for securitizations  and
other  transfers of financial assets and collateral and requires disclosures,
but  carries  over most of SFAS No. 125's provisions without reconsideration.
TXU  Europe is currently evaluating the impact the adoption of this  standard
will  have  on  its  sale of receivables program. SFAS No. 140  requires  TXU
Europe  to  incorporate  certain disclosures  about  securitizations  in  the
financial  statements  at  December 31, 2000.  These  disclosures  have  been
incorporated.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISK MANAGEMENT

  TXU  Europe  is  exposed  to a number of different market  risks  including
changes  in  gas and electricity prices, interest rates and foreign  currency
exchange rates.  TXU Europe has developed a control framework of policies and
procedures  to  monitor and manage the exposures arising from  volatility  in
these  markets.   TXU Europe enters into various derivative  instruments  for
both trading and non-trading purposes.

INTEREST RATE RISK

  TXU  Europe's  exposure to interest rate risk is managed by  maintaining  a
level of fixed and floating rate borrowings within limitations imposed by the
Board  of  Directors  of TXU Europe.  Interest rate swaps  and  forward  rate
agreements are used from time to time to adjust the proportion of fixed  rate
exposure within the specified limits.

  The  table  below  provides information concerning TXU  Europe's  financial
instruments as of December 31, 2000 that are sensitive to changes in interest
rates, which include debt obligations, by principal amount and interest  rate
swaps.   For  debt obligations, the table presents principal cash  flows  and
related  weighted  average interest rates by expected  maturity  dates.   TXU
Europe  has  entered into interest rate swaps under which it  has  agreed  to
exchange the difference between fixed-rate and variable-rate interest amounts
calculated  with  reference  to specified notional  principal  amounts.   The
contracts   require  settlement  of  net  interest  receivable  at  specified
intervals  which  generally  coincide with the dates  on  which  interest  is
payable  on  the underlying debt, primarily semi-annually.  When  differences
exist  between the swap settlement dates and the dates on which  interest  is
payable  on the underlying debt, the gap exposure, or basis risk, is  managed
by  means of forward rate agreements.  These forward rate agreements are  not
expected  to  have  a  material  effect on TXU Europe's  financial  position,
results  of  operations  or cash flows. None of the interest  rate  swaps  or
forward rate agreements were entered into for trading purposes.  For interest
rate swaps, the table presents notional amounts and weighted average interest
rates  by expected, or contractual, maturity dates. Weighted average variable
rates are based on rates in effect at the reporting date.



                                A-18

<PAGE>
<TABLE>
<CAPTION>




                                         Expected Maturity Date               2000              1999
                               ----------------------------------------- ----------------  -------------------
                                                                  There             Fair              Fair
                                2001   2002   2003   2004   2005   after   Total    Value    Total    Value

                                               (pounds  millions except percents)
<S>                            <C>    <C>    <C>    <C>    <C>    <C>      <C>       <C>      <C>     <C>
Long-term Debt (including
current maturities):

  Fixed Rate (pounds m)          291    252     2     366    751   1,493    3,155    3,160    2,609    2,640

  Average interest rate        7.19%  6.32%  6.80%  8.37%  7.03%   7.61%    7.41%        -    7.45%        -

  Variable Rate (pounds m)         1     12    979     30      6     414    1,442    1,442    1,386    1,386

  Average interest rate        7.19%  7.09%  6.71%  6.04%  6.85%   7.53%    6.77%        -    6.42%        -

Interest Rate Swaps:
(notional amounts)

  Fixed to Variable (pounds m)     -    234      -      -    301     335      870       (2)     928      (52)

  Average pay rate                 -  6.71%      -      -  6.71%   6.71%    6.71%        -    6.82%        -

  Average receive rate             -  6.15%      -      -  6.45%   6.75%    6.48%        -    6.48%        -

  Variable to Fixed (pounds m)     -    232    400      -    398     729    1,759      (62)   1,209        (a)

  Average pay rate                 -  7.00%  6.71%      -  6.63%   6.50%    6.65%        -    6.54%         -

  Average receive rate             -  6.18%  6.34%      -  6.11%   6.28%    6.24%        -    5.78%         -

<FN>
  (a) Fair value amount rounds to less than pounds 1 million.
</FN>
</TABLE>

  At  December  31,  1999,  there were approximately  pounds  15  million  in
forward  rate agreements outstanding which matured in the first few  days  of
January  2000.   There  was  no  material  market  risk  exposure  on   these
agreements.   There were no forward rate agreements outstanding  at  December
31, 2000.

ENERGY RISK MANAGEMENT

  Management  of the market risks associated with the portfolio  of  physical
generation  assets and gas and electricity sales and derivative contracts  is
critical  to  the  success of TXU Europe Group, and therefore,  comprehensive
risk  management processes, policies and procedures have been established  to
monitor  and  control these market risks.  TXU Europe Energy Trading  manages
its  market risk on a portfolio basis within the limitations imposed  by  the
Board of Directors of TXU Europe Group (TXU Europe Board).  Market risks  are
monitored  daily  utilizing  appropriate mark-to-market  methodologies  which
value the portfolio of contracts and the hypothetical effect on this value of
changes in market prices.

     ELECTRICITY - NON-TRADING ACTIVITIES

  The energy retail business contracts to supply electricity to customers  at
fixed prices and buys output from the electricity Pool to meet the demand  of
these customers.  Since the price of electricity purchased from the Pool  can
be  volatile,  TXU  Europe  Group is exposed to the  risk  arising  from  the
differences  between  the  fixed  price at  which  it  sells  electricity  to
customers and the variable prices at which it buys electricity from the Pool.
TXU Europe Group's generation business provides a physical hedge to this risk
as it is exposed to Pool price fluctuations from selling electricity into the
Pool.   TXU Europe Group's overall exposure to those risks is managed by  the
energy management business which maintains energy price exposures to within a

                                A-19

<PAGE>
limit  set by the TXU Europe Board and also enters into derivatives to  hedge
the portfolio.  The derivatives used are mainly contracts for differences and
electricity   forward   agreements  but  also   involve   other   contractual
arrangements. (See Note 15 to Consolidated Financial Statements.)   Contracts
for  differences are bilaterally negotiated contracts which fix the price  of
electricity  for an agreed quantity and duration by reference  to  an  agreed
strike  price, which is the price specified in the contract for  differences.
Electricity  forward  agreements are similar in principle  to  contracts  for
differences  but are on standard terms and tend to be for smaller  quantities
and  shorter  durations.  The hypothetical loss in fair value of  TXU  Europe
Group's  contracts for differences, electricity forward agreements and  other
contracts at December 31, 2000 and 1999 entered into for non-trading purposes
arising from a 10% adverse movement in future electricity prices is estimated
at  pounds  270 million and pounds 21 million, respectively.   This  loss  is
calculated  by  modeling the contracts against an internal forecast  of  Pool
prices   using  discounted  cash  flow  techniques.   The  increase  in   the
hypothetical  market movement results from the increase  in  energy  purchase
commitments  during  2000,  mainly  the  Norweb  Energi  acquisition.   These
commitments were mostly at above market rates at acquisition.  As these  non-
trading  contracts are used to hedge sales to retail customers,  any  adverse
movement  in  wholesale  electricity prices  does  not  directly  affect  the
performance or profitability of TXU Europe, which is more affected  by  price
movements  in  retail markets.  The fair values of outstanding contracts  for
differences, electricity forward agreements and other contracts held for non-
trading purposes at December 31, 2000 were out-of-the-money (negative) pounds
589 million  compared with in-the-money fair values (positive) of  pounds  76
million  at  December  31,  1999, calculated as the  difference  between  the
expected  value  of  the  contracts  for  differences,  electricity   forward
agreements  and other contracts, based on their known strike price  or  other
known  value, and the current market value of such instruments, based  on  an
estimate  of  forward   prices for the contract for  difference,  electricity
forward agreement or other contracts during their term. The decrease in  fair
values  from  1999  primarily reflect a decline  in  UK  Pool  prices  and  a
lengthening of the portfolio position.

  ENERGY TRADING ACTIVITIES

  TXU  Europe  Group  also  enters into contracts for differences  and  other
energy  purchase  contracts  for the purpose of trading.   TXU  Europe  Group
trades  both  in  the UK market, where it seeks to take advantage  of  market
conditions  by extending or shortening the size of its portfolio of  purchase
and  sale  commitments,  and  in continental Europe,  where  it  enters  into
financial  instruments in markets where it has no physical assets  or  retail
volumes.   Any resulting exposures to fluctuations in energy prices resulting
from  such trading are within limits set by the TXU Europe Board.  TXU Europe
Group  accounts for its trading activities in accordance with the  accounting
policies set out in Note 2 to the Consolidated Financial Statements.

  The  portfolio concept subjects the entities to a number of risks and costs
associated  with  the future contractual commitments, including  price  risk,
credit   risk  associated  with  counterparties,  product  location   (basis)
differentials  and  market liquidity.  TXU Europe continuously  monitors  the
valuation  of identified risks and adjusts the portfolio valuation  based  on
present  market  conditions.  Reserves are established  in  recognition  that
certain  risks  exist  until delivery of energy has occurred,  counterparties
have  fulfilled their financial commitments and related financial instruments
mature  or are closed out.  Price and credit risk are further managed  within
the  established trading policies and limits established for TXU Europe which
are evaluated on a daily basis.

    Electricity  -  Trading activities experienced net  gains  of  pounds  50
million in 2000 and  pounds 23 million in 1999. The hypothetical loss in fair
value of TXU Europe Group's forwards, options, contracts for differences  and
other energy contracts at December 31, 2000 and 1999, which were entered into
for  trading  purposes,  arising  from  a  10%  adverse  movement  in  future
electricity  prices is estimated at pounds 30 million and pounds  4  million,
respectively.  The  fair  values of outstanding  contracts  for  differences,
electricity  forward agreements and other contracts entered into for  trading
purposes at December 31, 2000 were pounds 37 million compared with pounds  17
million at December 31, 1999.

  Gas  -  During  2000, net gains of pounds 47 million were  recognized  from
trading  gas commodity contracts or other derivatives in the UK and  mainland
Europe,  mainly  the result of higher gas prices.  The hypothetical  loss  in
fair  value  of  TXU  Europe Group's futures, swaps and other  gas  commodity
contracts  in  existence at December 31, 2000, which were  entered  into  for
trading purposes, arising from a 10% adverse movement in future gas prices is
estimated  at  pounds  24  million.  The fair value of  such  instruments  at
December 31, 2000 was pounds 16 million, and the average fair value for  2000
was pounds 5 million.

                                A-20

<PAGE>

  Coal  -  In  the  coal business, TXU Europe enters into contracts  for  the
purchase  and  sale  of  coal  primarily to assure  supplies  for  generation
purposes.  The overall net exposure of TXU Europe to the coal spot market  is
managed by using coal options, swaps and futures.  During 2000, net gains  of
pounds  3  million were recognized from trading coal commodity  contracts  or
other  derivatives.  There were no trading activities in coal for  1999.  The
hypothetical loss in fair value of TXU Europe Group's options, swaps, futures
and  other commodity contracts in existence at December 31, 2000, which  were
entered  into  for trading purposes, arising from a 10% adverse  movement  in
future  coal  prices is estimated at less than pounds 1  million.   The  fair
value of such instruments at December 31, 2000 was pounds 2 million, and  the
average fair value for 2000 was less than pounds 1 million.

FOREIGN CURRENCY RISK

  TXU  Europe  manages its exposure to foreign currency rates principally  by
matching  foreign  currency denominated assets with borrowings  in  the  same
currency or by swapping principal and interest components of foreign currency
borrowings  into sterling.   Currency swaps and options are also  used  where
appropriate  to hedge any residual exposures.  In addition, some  imports  of
capital  equipment and fuel are denominated in currencies other than sterling
and the sterling cost of these is fixed by means of forward contracts as soon
as TXU Europe's contractual commitment is firm.

  The  following  table summarizes notional amounts at the contract  exchange
rates,  weighted average contractual exchange rates and estimated fair values
by contract maturity for contracts open at December 31, 2000 and 1999:

<TABLE>
<CAPTION>




                                           Expected Maturity Date
                                ------------------------------------------------   2000   1999
                                                                   There-           Fair   Fair
                                 2001   2002   2003   2004   2005   after   Total  Value   Value
                                -----  -----  -----  -----  -----  ------  ------ ------  ------
                                  (pounds  millions, except exchange rates which are in US$)
<S>                             <C>     <C>   <C>    <C>     <C>    <C>     <C>      <C>    <C>
Principal  payments - pounds       -     216     -      -     398    645    1,259     96      2

  Average  exchange rate - $       -    1.62     -      -    1.63   1.86     1.75      -      -

Interest   payments - pounds      83      83    69     69      69    502      875      5    (25)

  Average exchange rate - $     1.63    1.63  1.63   1.63    1.63   1.62     1.62      -      -

</TABLE>


                         FORWARD-LOOKING STATEMENTS

  This  report  and  other presentations made by TXU Europe contain  forward-
looking  statements  within  the meaning of Section  21E  of  the  Securities
Exchange  Act  of  1934, as amended.  Although TXU Europe  believes  that  in
making  any  such statements its expectations have been based  on  reasonable
assumptions,  any such statement involves uncertainties and is  qualified  in
its  entirety by reference to the following important factors, among  others,
that  could cause the actual results of TXU Europe to differ materially  from
those projected in such forward-looking statement:  (1) general economic  and
business  conditions  in  the UK and continental  Europe;  (2)  unanticipated
changes  in  interest  rates, in rates of inflation, or in  foreign  exchange
rates;  (3)  prevailing governmental, statutory, regulatory or administrative
policies and initiatives affecting TXU Europe, its subsidiaries or the UK  or
European  electric and gas utility industries; (4) general  industry  trends;
(5)  competition; (6) power costs and availability; (7) changes  in  business
strategy, development plans or vendor relationships; (8) availability,  terms
and deployment of capital and capital market conditions; (9) availability  of
qualified  personnel; (10) changes in, or the failure or inability to  comply
with,  governmental regulations, including, among other things, environmental
regulations;  (11)  changes in tax laws; (12) weather  conditions  and  other
natural  phenomena;  (13) unanticipated population  growth  or  decline,  and
changes  in  market demand and demographic patterns; (14) access to  adequate
transmission   facilities  to  meet  changing  demand;   (15)   pricing   and
transportation  of  oil,  coal,  natural  gas  and  other  commodities;  (16)
unanticipated  changes in operating expenses and capital  expenditures;  (17)
the  ability  of  TXU  Europe to enter into financial  instruments  to  hedge

                                A-21

<PAGE>
various  market risks or the inability of the counterparties  to  meet  their
obligations  with  respect  to financial instruments;  and  (18)  changes  in
technology used and services offered by TXU Europe.

  Any  forward-looking statements speak only as of the date of  this  report.
TXU Europe undertakes no obligation to publicly update or revise any forward-
looking statements to reflect events or circumstances after the date on which
such  statement is made or to reflect the occurrence of unanticipated events.
New factors emerge from time to time and it is not possible for TXU Europe to
predict all of such factors, nor can it assess the impact of each such factor
or the extent to which any factor or combination of factors may cause results
to differ materially from those contained in any forward-looking statement.







                                A-22

<PAGE>

                     TXU EUROPE LIMITED AND SUBSIDIARIES

                         STATEMENT OF RESPONSIBILITY

   The  management of TXU Europe and subsidiaries (TXU Europe) is  responsible
for  the  preparation, integrity and objectivity of the consolidated financial
statements  of TXU Europe and other information included in this report.   The
consolidated  financial  statements have  been  prepared  in  conformity  with
accounting principles generally accepted in the United States of America.   As
appropriate,  the statements include amounts based on informed  estimates  and
judgments of management.

   The  management  of TXU Europe has established and maintains  a  system  of
internal control designed to provide reasonable assurance, on a cost-effective
basis,  that  assets are safeguarded, transactions are executed in  accordance
with  management's  authorization  and  financial  records  are  reliable  for
preparing  consolidated financial statements.  Management  believes  that  the
system  of control provides reasonable assurance that errors or irregularities
that  could be material to the consolidated financial statements are prevented
or  would  be  detected within a timely period.  Key elements in  this  system
include  the  effective  communication of  established  written  policies  and
procedures,  selection and training of qualified personnel and  organizational
arrangements  that  provide an appropriate division  of  responsibility.  This
system of control includes a risk monitoring framework designed to provide  an
assurance  to  the  Board  of  Directors of TXU Europe  of  the  adequacy  and
effectiveness  of  business systems and controls.   Management  considers  the
recommendations  of  the  Risk  Monitoring & Assurance  team  and  independent
auditors  concerning  TXU  Europe's  system  of  internal  control  and  takes
appropriate actions which are cost-effective in the circumstances.  Management
believes  that,  as  of  December 31, 2000, TXU Europe's  system  of  internal
control was adequate to accomplish the objectives discussed herein.

   The   Board   of   Directors   of  TXU  Europe  addresses   its   oversight
responsibility  for the consolidated financial statements  through  its  Audit
Committee.   The Audit Committee meets regularly with TXU Europe's management,
the  Risk  Monitoring  &  Assurance team and independent  auditors  to  review
matters  relating to financial reporting, auditing and internal  control.   To
ensure  auditor  independence, both the Risk Monitoring & Assurance  team  and
independent auditors have full and free access to the Audit Committee.

   The  independent  auditors, Deloitte & Touche, are  engaged  to  audit,  in
accordance with auditing standards generally accepted in the United States  of
America,  the  consolidated  financial  statements  of  TXU  Europe  and   its
subsidiaries and to issue their report thereon.


                                   /s/ PHILIP G TURBERVILLE
                                -------------------------------
                                Philip G Turberville, Principal
                                      Executive Officer



                                       /s/ PAUL C MARSH
                                -------------------------------
                                  Paul  C Marsh ,  Principal
                                      Financial Officer



                                   /s/ SCOTT R J LONGHURST
                                -------------------------------
                                Scott R J Longhurst,  Principal
                                      Accounting Officer


                                A-23

<PAGE>

INDEPENDENT AUDITORS' REPORT


  To  the  Board  of  Directors and Shareholders of TXU  Europe  Limited  and
Subsidiaries:



  We  have audited the accompanying consolidated balance sheets of TXU Europe
Limited  (formerly  TXU  Eastern Holdings Limited)  and  subsidiaries  as  of
December  31,  2000  and  1999, and the related  consolidated  statements  of
income,  comprehensive income, cash flows and shareholder's equity  for  the
years  then ended.  These financial statements are the responsibility of  TXU
Europe's  management.  Our responsibility is to express an opinion  on  these
financial  statements based on our audits.  The financial statements  of  TXU
Europe  Limited for the period from formation through December 31, 1998,  and
the  period  from April 1, 1998 through May 18, 1998, were audited  by  other
auditors whose reports, dated respectively March 3, 1999 and April 26,  1999,
expressed an unqualified opinion on those statements.

  We  conducted  our  audits in accordance with auditing standards  generally
accepted  in the United States of America.  Those standards require  that  we
plan  and perform the audit to obtain reasonable assurance about whether  the
financial  statements are free of material misstatement.  An  audit  includes
examining,  on a test basis, evidence supporting the amounts and  disclosures
in the financial statements.  An audit also includes assessing the accounting
principles  used  and significant estimates made by management,  as  well  as
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

  In  our opinion, such consolidated financial statements present fairly,  in
all  material  respects,  the financial position of TXU  Europe  Limited  and
subsidiaries at December 31, 2000 and 1999, and the consolidated  results  of
their  operations and their cash flows for the years then ended in conformity
with  accounting  principles  generally accepted  in  the  United  States  of
America.



  DELOITTE & TOUCHE

  London, England
  February 1, 2001



                                A-24

<PAGE>



                      Report of Independent Accountants

To  the  Board of Directors and Shareholders of TXU Europe Limited  (formerly
known as TXU Eastern Holdings Limited) and Subsidiaries

In  our  opinion,  the accompanying consolidated statements  of  consolidated
income, of comprehensive income, of common stock equity and of cash flows for
the  period  from formation (February 5, 1998) to December 31,  1998  present
fairly, in all material respects, the results of operations and cash flows of
TXU  Europe  Limited  (formerly known as TXU Eastern  Holdings  Limited)  and
Subsidiaries for the period from formation (February 5, 1998) to December 31,
1998,  in  conformity with accounting principles generally  accepted  in  the
United  States.   These  financial statements are the responsibility  of  the
Company's  management; our responsibility is to express an opinion  on  these
financial  statements based on our audit.  We conducted our  audit  of  these
statements  in accordance with generally accepted auditing standards  in  the
United  Kingdom which do not differ significantly with those  in  the  United
States  and  which  require  that we plan and perform  the  audit  to  obtain
reasonable  assurance  about whether the financial  statements  are  free  of
material  misstatement.   An  audit includes  examining,  on  a  test  basis,
evidence  supporting the amounts and disclosures in the financial statements,
assessing  the accounting principles used and significant estimates  made  by
management, and evaluating the overall financial statement presentation.   We
believe  that our audit provides a reasonable basis for the opinion expressed
above.




PricewaterhouseCoopers
London, England
March 3, 1999




                                A-25

<PAGE>




                      Report of Independent Accountants

To  the Board of Directors and Shareholders of TXU Europe Group plc (formerly
known as Eastern Group plc) and Subsidiaries

In  our  opinion,  the accompanying consolidated statements  of  consolidated
income, of comprehensive income, of common stock equity and of cash flows for
the  period  from April 1, 1998 through May 18, 1998 present fairly,  in  all
material  respects, the results of operations and cash flows  of  TXU  Europe
Group  plc  (formerly  known as Eastern Group plc) and Subsidiaries  for  the
period from April 1, 1998 through May 18, 1998, in conformity with accounting
principles  generally  accepted  in  the  United  States.   These   financial
statements   are   the  responsibility  of  the  Company's  management;   our
responsibility  is to express an opinion on these financial statements  based
on  our audit.  We conducted our audit of these statements in accordance with
generally  accepted  auditing standards in the United Kingdom  which  do  not
differ  significantly with those in the United States and which require  that
we  plan  and perform the audit to obtain reasonable assurance about  whether
the  financial  statements  are  free of  material  misstatement.   An  audit
includes  examining,  on a test basis, evidence supporting  the  amounts  and
disclosures in the financial statements, assessing the accounting  principles
used and significant estimates made by management, and evaluating the overall
financial  statement  presentation.  We believe that  our  audit  provides  a
reasonable basis for the opinion expressed above.




PricewaterhouseCoopers
London, England
April 26, 1999



                                A-26

<PAGE>

TXU EUROPE LIMITED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME


<TABLE>
<CAPTION>




                                                     Successor                  Predecessor
                                         ----------------------------------   --------------
                                                                Period from     Period from
                                            Year Ended           Formation        April 1,
                                            December 31,          Through          1998
                                          -------------------   December 31,      Through
                                            2000      1999         1998         May 18,1998
                                          --------  ---------   ------------   -------------
                                                       (pounds  million)

<S>                                         <C>        <C>         <C>              <C>
Operating Revenues                          4,671      3,753       2,165             425
                                          -------     ------      ------          ------
Operating Expenses
  Energy purchased for resale and
   fuel consumed                            3,273      2,244       1,328             287
  Operation and maintenance                   694        706         379             123
  Depreciation and other amortization         159        173          92              22
  Goodwill amortization                       102         87          52               4
                                          -------     ------      ------          ------
  Total operating expenses                  4,228      3,210       1,851             436
                                          -------     ------      ------          ------
Operating Income (Loss)                       443        543         314             (11)
Other Income - Net                             74          8          46               1
                                          -------     ------      ------          ------
Income (Loss) Before Interest,
  Income Taxes, Distributions and
  Minority Interest                           517        551         360            (10)

Interest Income                                59         63          64             12
Interest Expense                              370        347         269             28
                                          -------     ------      ------          ------
Income (Loss) Before Income
  Taxes, Cumulative Effect of Change in
  Accounting, Distributions and
  Minority Interest                           206        267         155            (26)

Income Tax Expense (Benefit)                   70        111          67             (5)
                                          -------     ------      ------          ------
Income (Loss) Before Cumulative
  Effect of Change in Accounting,
  Distributions and Minority Interest         136        156          88            (21)

Cumulative Effect On Prior Years
  (To December 31,  1999) of Change to a
  New Depreciation Method (Net of pounds
  3 million tax effect)                         7          -           -              -

Distributions on Preferred Securities
   of Subsidiary Perpetual Trust               (8)         -           -              -

Minority Interest                             (15)       (18)        (11)             -
                                          -------     ------      ------          ------
Net Income (Loss)
                                              120        138          77            (21)
                                          =======     ======      ======          ======
</TABLE>

See Notes to Consolidated Financial Statements.

                                        A-27

<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME



<TABLE>
<CAPTION>


                                                                Successor                  Predecessor
                                                    ----------------------------------   --------------
                                                                           Period from     Period from
                                                       Year Ended           Formation        April 1,
                                                       December 31,          Through          1998
                                                     -------------------   December 31,      Through
                                                       2000      1999         1998         May 18,1998
                                                     --------  ---------   ------------   -------------
                                                                  (pounds  million)
<S>                                                     <C>       <C>           <C>            <C>
Net Income (Loss)                                       120       138           77             (21)

Other Comprehensive Income (Loss)
  Net change during period, net of tax effects:

    Unrealized holding gains (losses)on
      investments classified as available for sale       19         -           (8)             (3)

    Reclassification to other income -
      net of gain realized  on sale of SME              (14)        -            -               -

    Cumulative currency translation adjustment            1         1            -               -
                                                    --------   -------     -------         -------
    Total                                                 6         1           (8)             (3)
                                                    --------   -------     -------         -------
Comprehensive Income (Loss)                             126       139           69             (24)
                                                    ========   =======     =======         =======

</TABLE>



See Notes to Consolidated Financial Statements.

                                A-28

<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS

<TABLE>
<CAPTION>



                                                         Successor                  Predecessor
                                             ----------------------------------   --------------
                                                                    Period from     Period from
                                                Year Ended           Formation        April 1,
                                                December 31,          Through          1998
                                              -------------------   December 31,      Through
                                                2000      1999         1998         May 18,1998
                                              --------  ---------   ------------   -------------
                                                           (pounds  million)

<S>                                             <C>       <C>           <C>            <C>
Cash Flows - Operating Activities
  Net income (loss)                              120       138            77            (21)
  Adjustments to reconcile net income (loss)
    to cash provided by operating activities:

  Cumulative effect of change in                 (10)        -             -              -
    accounting principle
  Depreciation and amortization                  261       260           144             26
  Deferred income taxes                           81        89            24             (7)
  Gain on sale of assets and investments         (65)        -           (13)             -
  Other                                           12        18             4              -
  Changes in operating assets and liabilities:
    Accounts receivable                         (100)      113          (138)            65
    Inventories                                   53        16           (26)            10
    Prepayments and other assets                 (66)      (62)           (7)            (4)
    Accounts payable (including affiliates)      182       (33)          205              6
    Interest and taxes accrued                   (44)        6           (55)            29
    Other liabilities                             83      (128)         (211)           (30)
    Due to affiliates                              -         -            33              -
                                              -------   ------        ------         ------
      Cash provided by operating activities      507       417            37             74
                                              -------   ------        ------         ------
Cash Flows - Investing Activities
  Acquisition of  businesses (net of cash
    acquired of pounds 2,011 in 1998)           (319)        -        (1,432)             -
  Capital expenditures                          (229)     (385)         (207)           (51)
  Proceeds from sale of assets and
    other investments                            137         4            60              -
  Change in restricted cash                       68       (23)            -              -
  Other investments                             (238)     (282)         (188)           (27)
                                              -------   ------        ------         ------
      Cash used in investing activities         (581)     (686)       (1,767)           (78)
                                              -------   ------        ------         ------
Cash Flows - Financing Activities
  Borrowings of long-term debt                 1,350     2,423         2,130              -
  Issuance of common stock to parent               -         -         1,467              -
  Retirements of long-term debt               (1,077)   (1,529)       (1,497)             -
  Issuance of preferred securities of
    subsidiary perpetual trust                    95         -             -              -
  Receivable securitization                     (172)     (123)            -              -
  Change in notes payable - banks and
    other short-term loans                       275        21           168             16
  Minority interest                                -         -           166              -
  Retirements of advances from TXU Corp.           -      (682)         (200)             -
  Debt discount and financing expenses           (11)      (22)          (36)             -
  Distributions on preferred securities of
    subsidiary perpetual trust                    (8)        -             -              -
  Dividends paid                                   -         -            (1)             -
                                              -------   ------        ------         ------
      Cash provided by financing activities      452        88         2,197             16
                                              -------   ------        ------         ------
Effect Of Exchange Rates On Cash And
  Cash Equivalents                                 -        (1)            -              -
                                              -------   ------        ------         ------
Net Change In Cash And Cash Equivalents          378      (182)          467             12
Cash And Cash Equivalents - Beginning Balance    285       467             -            714
                                              -------   ------        ------         ------
Cash And Cash Equivalents - Ending Balance       663       285           467            726
                                              =======   ======        ======         ======

</TABLE>

See Notes to Consolidated Financial Statements.


                                A-29

<PAGE>

TXU EUROPE LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                            December 31,
                                                        -------------------
                                                          2000        1999
                                                        -------     -------
                                                         (pounds  million)
<S>                                                    <C>          <C>
ASSETS

Current Assets
  Cash and cash equivalents                               663          285
  Accounts receivable                                     743          469
  Inventories - at average cost                            72          122
  Prepayments                                              56           58
  Energy trading risk management assets                   609            -
  Other current assets                                     41           57
                                                       ------       ------
    Total current assets                                2,184          991
                                                       ------       ------
Investments
  Restricted cash                                         672          740
  Other                                                   695          520

    Total investments                                   1,367        1,260

Property, Plant And Equipment - Net                     2,781        2,718
Goodwill                                                3,945        3,422
Deferred Debits And Other Assets                          670          514
                                                      -------       ------
      Total                                            10,947        8,905
                                                      =======       ======

LIABILITIES AND CAPITALIZATION

Current Liabilities
  Notes payable - banks                                   525          251
  Long-term debt due currently                            862          380
  Short-term loans on accounts receivable                   5          177
  Accounts payable:
    Trade                                                 712          458
    Affiliates                                             52           49
  Energy trading risk management liabilities              555            -
  Taxes accrued                                             -          194
  Interest accrued                                         78           61
  Other current liabilities                               166          156
                                                      -------       ------
    Total current liabilities                           2,955        1,726
                                                      -------       ------
Accumulated deferred income taxes                         467          409
Provision for unfavorable contracts                       573           89
Other deferred credits and noncurrent liabilities         320          226
Long-term debt, less amounts due currently              4,480        4,539
Preferred securities of subsidiary perpetual trust         95            -
Minority interest                                         258          243
Commitments And Contingencies (Notes 16 and 17)
Shareholders' equity                                    1,799        1,673
                                                      -------       ------
    Total                                              10,947      8,905
                                                      =======       ======
</TABLE>

See Notes to Consolidated Financial Statements.

                                A-30

<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDER'S EQUITY



<TABLE>
<CAPTION>



                                                                       Accumulated
Period from April 1, 1998 through                       Retained          Other
May 18, 1998 (Predecessor)           Contributed        Earnings      Comprehensive
                                       Capital          (Deficit)         Loss
                                     -----------       -----------    -------------
                                          (pounds  million)
<S>                                     <C>               <C>             <C>
Balance at March 31, 1998               2,603             (794)             (7)
Net loss                                    -              (21)              -
Unrealized loss on securities
classified as available for sale            -                -              (3)
                                       ------            -----           -----
Balance at May 18, 1998                 2,603             (815)            (10)
                                       ======            =====           =====
</TABLE>

<TABLE>
<CAPTION>


                                                                              Period from
                                                                                Formation
                                                    Year Ended December 31,      Through
                                                  -------------------------    December 31,
                                                     2000           1999           1998
                                                  ---------       ---------    ------------
                                                              (pounds  million)
<S>                                                 <C>             <C>            <C>
Common Stock  - authorized shares
  3,000,000,000 shares at US $1 par and
  100 deferred shares at pounds 1 par

Balance at beginning of period                      1,467           1,467              -
 Issuance of common stock to parent
   (2,455,705,299 shares)                               -               -          1,467
                                                   ------          ------         ------
Balance at end of period
   (2,455,705,299 shares)                           1,467           1,467          1,467
                                                   ------          ------         ------

Retained Earnings

Balance at beginning of period                        213              76              -
  Net income                                          120             138             77
  Cash dividends                                        -               -             (1)
  Other                                                 -              (1)             -
                                                   ------          ------         ------
Balance at end of period                              333             213             76
                                                   ------          ------         ------
Accumulated Other Comprehensive
  Income (Loss) - net of Tax

  Unrealized holding gains (losses)
    on securities classified as
    available for sale

    Balance at beginning of period                     (8)             (8)             -
      Change in the period                              5               -             (8)
                                                   ------          ------         ------
    Balance at end of period                           (3)             (8)            (8)
                                                   ------          ------         ------
  Foreign currency translation
    adjustments

    Balance at beginning of period                      1               -              -
      Change in the period                              1               1              -
                                                   ------          ------         ------
Balance at end of period                                2               1              -
                                                   ------          ------         ------
  Total accumulated other
    comprehensive income (loss)                        (1)             (7)            (8)
                                                   ------          ------         ------
Shareholder's Equity                                1,799           1,673          1,535
                                                   ======          ======         ======


</TABLE>
See Notes to Consolidated Financial Statements.

                                A-31

<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   DESCRIPTION OF BUSINESS, ACQUISITIONS AND DISPOSITIONS

       TXU   Europe   Limited  (TXU  Europe)  is  an  indirect,  wholly-owned
    subsidiary  of  TXU  Corp.,  a  Texas  corporation.   TXU  Corp.   is   a
    multinational  energy services holding company that  is  engaged  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, primarily in the United States (US),  Europe  and
    Australia.   TXU  Europe  is a holding company  for  TXU  Corp.'s  United
    Kingdom  (UK)  and other European operations. Almost all of TXU  Europe's
    operating  income is derived from, and consolidated assets are  held  by,
    TXU   Europe  Group  plc  (TXU  Europe  Group)  and  TXU  Europe  Group's
    subsidiaries.

       The  business  and  operations  of TXU  Europe  and  its  subsidiaries
    consist  of  two main businesses, energy and networks, which are  divided
    into three principal operating segments, as follows:

       ENERGY   -   The  Energy  business  manages  TXU  Europe's  integrated
    portfolio  of  customers, assets and contracts in the UK and  continental
    Europe.    Operations  in  the  UK  are  conducted  through  wholly-owned
    subsidiaries.   European activities are conducted  through  both  wholly-
    owned  subsidiaries and joint-venture operations.  Through its  portfolio
    management  and  trading operations, TXU Europe seeks  to  allocate  risk
    capital  so  as  to  maximize  returns across  European  markets.   As  a
    consequence,  the  composition of assets and operations  in  each  market
    within  the  portfolio  changes from time to  time.   The  two  operating
    segments of the Energy business are:

       (i)  the  ENERGY  RETAIL  business, which as  of  December  31,  2000,
    supplies  electricity  and gas to approximately 5.5 million  residential,
    industrial  and commercial customers in the UK, including  those  arising
    from the Norweb Energi acquisition (described below); and

       (ii)  the  PORTFOLIO  TRADING AND POWER business  (formerly  known  as
    Energy   management  and  generation),  which  manages  a  portfolio   of
    generation assets and contracts throughout Europe.

       NETWORKS -

       The  third  operating  segment is the NETWORKS  business  which  owns,
    manages  and,  through  its networks management joint  venture,  24seven,
    operates the electricity distribution system in the UK.

       UK  energy operations are carried out principally through TXU Europe's
    subsidiaries, Eastern Electricity plc (Eastern Electricity)  (which  also
    owns  the  networks  electricity  distribution  system),  Eastern  Energy
    Limited (Eastern Energy), Eastern Natural Gas Retail Limited, TXU  Europe
    Power Ltd (and its subsidiaries) and TXU Europe Energy Trading Ltd.

       Continental European energy operations are carried out as follows:

       (i)  Portfolio trading in central European markets through TXU  Europe
    Energy  Trading  BV  (and its subsidiaries), primarily  in  Germany,  the
    Netherlands, Switzerland and Spain; and

       (ii)Nordic  operations through TXU Nordic Energy Oy (a  joint  venture
    with  Pohjolan  Voima  Oy  (PVO), Finland's  second  largest  electricity
    generator)  which trades energy on Nordic markets, has  access  to  hydro
    generation at Svartisen and Kobbelv and participates in distribution  and
    retail markets through joint ventures, especially Savon Voima Oyj (SVO).

       European  operations  were further expanded when  Stadtwerke  Kiel  AG
    (Kiel  AG)  became  a  subsidiary of the group on  January  8,  2001,  as
    described below.

                                A-32

<PAGE>

    FORMATION

       TXU  Europe was incorporated as a private limited company on  February
     5,  1998.  TXU  Europe  is  a  holding company  that  owns  90%  of  the
     outstanding  common stock of TXU Finance (No. 2) Limited  (TXU  Finance)
     which  in turn owns 100% of the common stock of TXU Acquisitions Limited
     (TXU Acquisitions).  On May 19, 1998, TXU Acquisitions gained control of
     The  Energy  Group PLC (TEG), the former holding company of  TXU  Europe
     Group, formerly known as Eastern Group plc, after all conditions to  its
     offer for all of the ordinary shares of TEG were satisfied or waived.

       TXU  Europe Group is considered the predecessor company to TXU Europe.
     Financial  statements for periods prior to the May 19, 1998  acquisition
     date are labeled "Predecessor".

       The  "period from formation through December 31, 1998" referred to  in
     these   financial  statements  represents  February  5,   1998   through
     December  31,  1998, inclusive.  From March 1998 to May  18,  1998,  TXU
     Europe, through TXU Acquisitions, had acquired an equity interest in TEG
     of approximately 22%, which resulted in the recognition of equity income
     of pounds 2 million for that period, which is reflected in "Other Income
     - Net".

    PURCHASE ACCOUNTING

       The  acquisition  of  TEG  was accounted for as  a  purchase  business
     combination in accordance with accounting principles generally  accepted
     in  the United States of America (US GAAP).  Accordingly, the results of
     operations  of  the TEG businesses acquired have been consolidated  into
     the  results of operations of TXU Europe since acquisition  on  May  19,
     1998.   The total purchase consideration for the TEG businesses acquired
     was  approximately  pounds  4.4 billion.  The  excess  of  the  purchase
     consideration plus acquisition costs over the net fair value of tangible
     and  identifiable  intangible assets acquired  and  liabilities  assumed
     resulted  in  goodwill of pounds 3.5 billion, which is  being  amortized
     over 40 years.

     OTHER ACQUISITIONS AND DISPOSITIONS

       TXU  Europe  continually  reviews  its  portfolio  of  businesses  and
    investments  and makes adjustments as considered necessary  to  meet  its
    objectives  and  to maintain financial and operational  flexibility.   As
    part  of  this  review,  capital  may be  redeployed  within  the  energy
    portfolio to maximize returns across Europe.

       On  August 3, 2000, TXU Europe purchased United Utilities plc's retail
     energy  supply  business, Norweb Energi (a division of Norweb  plc)  for
     total  consideration,  including direct costs  of  the  acquisition,  of
     pounds 340 million.  Financing was provided through existing bank  lines
     and cash balances on hand.  The transaction also includes the assumption
     of  certain of Norweb Energi's obligations, including its power purchase
     agreements,  which  have  been  integrated  into  TXU  Europe's   energy
     portfolio.

       The  agreement for the purchase of Norweb Energi included the eventual
    transfer  of  the  current Norweb plc public electricity supply  license-
    area  customers  (franchise or "in area" customers) and the  transfer  of
    Norweb  plc's  interest in the power purchase agreements  to  TXU  Europe
    Group.   TXU  Europe  Group  expects contracts  with  Norweb  plc  public
    electricity supply customers to be in place under the Utilities  Bill  in
    early  2001.  Meanwhile, Norweb plc's economic interest in the  franchise
    customers  and  power  purchase  agreements  are  effectively  passed  to
    Eastern  Energy  through  an agency agreement.  Eastern  Energy  acts  as
    Norweb  plc's  agent  in  meeting all its obligations  under  its  public
    electricity  supply license as they relate to the supply of  electricity.
    All  of Norweb plc's "out-of-area" electricity and all gas customers were
    transferred to TXU Europe Group on August 3, 2000.

       The  acquisition  of Norweb Energi was accounted  for  as  a  purchase
    business  combination.  The assets and liabilities of  Norweb  Energi  at
    the  acquisition date, including its power purchase agreements, have been
    adjusted  to their estimated fair values. The process of determining  the
    fair  value  of  assets and liabilities of Norweb  Energi  has  not  been
    completed.    The  latest  estimate  of  the  excess  of   the   purchase
    consideration plus acquisition costs over the net fair value of  tangible
    and  identifiable  intangible  assets acquired  and  liabilities  assumed
    resulted in goodwill of pounds 622 million which is being amortized  over

                                A-33

<PAGE>
    20  years.   This  amount  is subject to further revision  as  additional
    information  becomes  available, primarily relating  to  exit  costs  and
    other liabilities assumed at acquisition. The final determination of  the
    purchase  accounting  adjustments  requires  additional  information  and
    analysis,  which  is ongoing and is expected to be completed  within  one
    year  of the acquisition date. The results of operations of Norweb Energi
    are  reflected  in the consolidated financial statements  of  TXU  Europe
    from the August 3, 2000 effective date of the acquisition.

       Included  in  the liabilities assumed as of the acquisition  date  was
    pounds 10 million of estimated costs in connection with the severance  of
    employment  of 240 of the 280 employees of Norweb Energi and other  costs
    to  close  and  sublease the former office facilities  and  relocate  the
    remaining employees to other facilities. Management continues to  monitor
    the  status of these estimates as additional information is received. TXU
    Europe  expects the main parts of this exit plan will be completed within
    a year from the acquisition date.

       The  following summary of unaudited pro forma consolidated results  of
    TXU  Europe's  operations reflect the acquisition  of  Norweb  Energi  as
    though  it  had  occurred  at  the beginning of  the  respective  periods
    presented.
<TABLE>
<CAPTION>
                                                   Year Ended
                                                  December 31,
                                               -----------------
                                                 2000     1999
                                               -------  --------
                                                  pounds million
        <S>                                      <C>      <C>
        Revenues                                 5,270    4,851
        Operating Income                           507      639
        Net Income                                 142      166

</TABLE>

       These  pro  forma results are not necessarily indicative of  what  the
   actual  results  would  have  been had the  acquisition  occurred  at  the
   beginning  of  these  periods.  Further, the pro  forma  results  are  not
   intended to be a projection of future results of the combined companies.

       Also  on  August  3, 2000, TXU Europe announced that  its  subsidiary,
   Eastern Energy, had contracted its customer services operations to  Vertex
   Data  Science  Limited (Vertex), United Utilities plc's customer  services
   business.   Customer  services  include  call  centers,  billing,   credit
   management  and debt collection. Eastern Energy's 1,335 customer  services
   staff transferred to Vertex on September 1, 2000.

      On  January  8, 2001, TXU Europe completed the acquisition  of  51%  of
   Kiel  AG,  a  German  municipal  utility,  for  approximately  pounds  145
   million.  At  the  date  of acquisition, Kiel AG had  sterling  equivalent
   assets  of  approximately pounds 121million and liabilities of  pounds  82
   million.   The  process  of determining the fair  value  of  tangible  and
   identifiable  intangible assets acquired and liabilities assumed  has  not
   been  completed. The city government of Kiel, the state capital,  retained
   the  remaining 49% of the utility, which has approximately 250,000 gas and
   electricity  customers, 175 megawatts of power generation and 2.7  billion
   cubic feet of gas storage capacity.

       In  March  2000, upon receiving all final approvals, TXU Europe  Group
    and  EDF  London Investments plc, a subsidiary of Electricite de  France,
    created  an equally held joint venture company, named "24seven", for  the
    management,  operation and maintenance of their subsidiaries'  respective
    electricity   distribution  networks.   The  new  joint   venture   began
    operations  on April 7, 2000.  TXU Europe accounts for its investment  in
    24seven  by  the equity method of accounting.  24seven serves  over  five
    million  electricity  customers in London and  the  eastern  counties  of
    England.   Employees  of  the  joint  venturers'  subsidiaries,   Eastern
    Electricity  and  London  Electricity  plc,  have  been  transferred   to
    24seven.  The  physical  distribution  system  assets,  as  well  as  all
    operating   licenses,  continue  to  be  separately  owned   by   Eastern
    Electricity and London Electricity plc, respectively.  (See Note 2 for  a
    discussion of restructuring and other related costs.)

       In  November  1999,  TXU Europe formed a joint  venture  with  certain
    shareholders  of PVO, Finland's second largest electricity generator.  As
    part  of the transaction, TXU Europe contributed approximately euros  300
    million  (pounds 190 million) for an 81% ownership interest in the  joint
    venture  company, TXU Nordic Energy. The acquisition of the  interest  in
    PVO  resulted  in  goodwill of approximately pounds 37 million  which  is
    being  amortized  over 40 years. In December 1999, TXU  Europe  completed
    the  acquisition of an approximate 40% interest in SVO, Finland's seventh

                                A-34

<PAGE>
    largest  electricity distributor, for approximately  pounds  40  million.
    The  agreement includes an option which allows the majority  shareholders
    of  SVO  to  require TXU Europe to purchase all or some of the  remaining
    60%  interest  in  SVO at prices that are based upon a  multiple  of  the
    original  purchase  price for the first three years.  After  three  years
    the  purchase  price  is based upon a calculation which  considers  SVO's
    results  of  operations, as well as cash and cash equivalents  and  long-
    term  debt  balances on hand at the date the option  is  exercised.   The
    option  may  be  exercised at any time by the majority  shareholders  and
    does  not  expire. TXU Europe accounts for its investment in SVO  by  the
    equity method of accounting.

       On  March 1, 2000, TXU Europe Power acquired Nedalo BV for pounds  4.5
    million,  including  pounds  2.8 million of goodwill.   This  acquisition
    included  the  remaining 25% of Nedalo (UK) Limited it  did  not  already
    own.  Nedalo  BV  is a leading manufacturer of small electrical  combined
    heat and power plants.

       On  January 25, 2001, TXU Europe entered into a commitment to sell its
    19.2% interest in Hidroelectrica del Cantabrico, SA (Hidrocantabrico)  to
    a  consortium  led  by  Electricidade de  Portugal  S.A.,  the  Portugese
    utility  company,  and Spanish savings bank Caja de  Ahorro  de  Asturias
    (Cajastur).   Electricidade  de  Portugal  and  Cajastur  unconditionally
    offered  euros 24 per share for 100% of Hidrocantabrico.  In March  2000,
    TXU  Europe  (Espana)  S.L., a subsidiary of TXU  Europe,  announced  its
    intention  to  make  a  cash  offer to  acquire  all  of  the  shares  of
    Hidrocantabrico that TXU Europe did not then own. Later  in  March  2000,
    after  a  competing  bid had been issued, TXU Europe  announced  that  it
    would  not  pursue its offer.  In a series of private transactions  since
    that  date,  TXU  Europe  acquired additional shares  in  Hidrocantabrico
    until  it  holds  approximately 19.2% of  the  outstanding  shares.   TXU
    Europe  has  pre-emption rights over 4.9% of the stock in Hidrocantabrico
    currently  held by Electrabel SA (Electrabel), an electricity company  in
    Belgium,  if  Electrabel elects to sell its interests in  Hidrocantabrico
    to  another company during a one year period beginning July 4, 2000.  TXU
    Europe  is  subject  to  a conditional put option  by  which  it  can  be
    required  to  purchase  the  10%  interest  in  Hidrocantabrico  held  by
    Electrabel  to  the  extent  Electrabel is required  to  dispose  of  its
    holding  in  Hidrocantabrico by the European Union or Spanish Competition
    Authorities  during  a  one  year period beginning  July  4,  2000.   The
    conditions  of this put option include a reasonable notice period  before
    execution.   Results of operations for 2000 include approximately  pounds
    7  million  of costs incurred in connection with the intended  offer  for
    Hidrocantabrico, included in other income - net.

       In  May  2000,  TXU Europe sold its metering business in  the  UK  for
    pounds  36 million in proceeds, realizing a pre-tax gain of approximately
    pounds  29  million.  In addition, in August 2000, TXU  Europe  completed
    the  sale  of its interest in Severomoravska energetika, a.s. (SME),  for
    pounds  51 million in proceeds, realizing a pre-tax gain of approximately
    pounds 20 million. The investment in SME was previously accounted for  as
    an  available  for  sale marketable equity security, and  the  amount  of
    holding  gains  that  were  previously recorded  in  other  comprehensive
    income  has  been reclassified as realized gains.  Both  of  these  sales
    have been recorded in other income - net.

       In  December  1998,  TXU  Europe disposed  of  its  telecommunications
    business,  resulting  in a gain of pounds 13 million.   In  consideration
    for  the business, TXU Europe received cash of pounds 60 million  and  an
    investment  in  the  preferred  stock of the  purchaser,  NTL  Inc.   The
    investment  in  the  preferred  stock  was  sold  in  2000  resulting  in
    recognition of a pre-tax gain of pounds 8 million.

       On  February 1, 2001, TXU Europe announced it had agreed to  sell  its
    interest  in  the  North  Sea  gas fields for  approximately  pounds  138
    million  as  a result of its ongoing review of its program to  reposition
    its energy portfolio.

2.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

       The  consolidated financial statements are prepared in conformity with
     US  GAAP.  Certain prior year amounts have been reclassified to  conform
     to the current year's classification.

       Consolidation  -  The  consolidated financial statements  include  the
     accounts  of  TXU  Europe and all majority-owned subsidiaries.  Minority
     interest  represents the minority shareholders' proportionate  share  in
     the equity or income of TXU Europe's majority-owned subsidiaries.

                                A-35

<PAGE>

       All   significant  intercompany  items  and  transactions  have   been
     eliminated  in consolidation.  Investments in significant unconsolidated
     affiliates are accounted for by the equity method.

       Use  of  estimates  -  The  preparation of TXU  Europe's  consolidated
     financial   statements  requires  management  to  make   estimates   and
     assumptions about future events that affect the reporting and disclosure
     of  assets  and liabilities at the balance sheet dates and the  reported
     amounts  of  revenue  and  expense during  the  period  covered  by  the
     consolidated  financial  statements.   In  the  event  estimates  and/or
     assumptions  prove to be different from actual amounts, adjustments  are
     made in subsequent periods to reflect more current information.

       Cash  and cash equivalents - Cash equivalents consist of highly liquid
     investments,  which  are  readily convertible  into  cash  and  have  an
     original maturity of three months or less.

       Inventories - Inventories are stated at the lower of weighted  average
     cost or net realizable value.

       Marketable  securities  -  TXU  Europe  has  classified  all  of   its
     marketable  securities  as  available  for  sale.   Available  for  sale
     securities are carried at fair value with the unrealized gains or losses
     reported  as  a component of accumulated other comprehensive  income  or
     loss.   Declines  in  fair  value  that are  other  than  temporary  are
     reflected in income.

       Capitalized  interest  -  Interest is  capitalized  on  major  capital
     expenditures  during the period of construction and is  reflected  as  a
     reduction of interest expense in the statements of consolidated  income.
     Interest capitalized was pounds 10 million for 2000 and pounds 4 million
     for the period from formation through December 31, 1998. No interest was
     capitalized in 1999 or for the period from April 1, 1998 through May 18,
     1998.

       Property,  plant  and equipment - Property, plant  and  equipment  are
     stated  at  cost less accumulated depreciation. The cost  of  additions,
     improvements,  and  interest  during  the  period  of  construction  are
     capitalized,  while maintenance and repairs are charged to expense  when
     incurred.

       Leased  generating  stations  meeting  certain  criteria  and  related
     equipment  are  capitalized and the present value of the  related  lease
     payments is recorded as a liability.

       Depreciation  -  Depreciation of property,  plant  and  equipment,  is
     determined  on the straight-line method over estimated useful  lives  of
     the assets as follows:

     Electricity generating            30 years
       station assets
     Electricity generating            Shorter of lease period or
       station assets under capital      estimated remaining useful
       lease                             life
     Electricity distribution          50 years
       system assets and customer
       contributions to the
       construction of electricity
       distribution system assets

     Buildings                         Up to 60 years
     Leasehold improvements            Shorter of remaining lease
                                         term or estimated useful
                                         life
     Plant and equipment               Up to 10 years


       In   2000,  TXU  Europe  changed  the  depreciation  method  for   its
    distribution system assets. (See Note 3.)

       In  accordance  with  industry practice,  the  unamortized  amount  of
     customer  contributions to the construction of electricity  distribution
     system assets is deducted from property, plant and equipment.

       Upon  sale, retirement, abandonment or other disposition of  property,
     the  cost  and related accumulated depreciation are eliminated from  the
     accounts and any gain or loss is reflected in income.

       Prior  to  the  sale of upstream gas assets announced on  February  1,
     2001,  depletion  of  gas reserves was charged on  a  unit-of-production
     basis, based on an assessment of proven reserves. Appraisal expenditures
     of  gas  fields were accounted for under the successful efforts  method.

                                A-36

<PAGE>
     General  seismic  and other costs are expensed as incurred.   Provisions
     were made for abandonment costs relating to gas fields.  Such provisions
     were  determined  in accordance with local conditions and  requirements,
     and  on  the  basis of costs estimated at the respective  balance  sheet
     date.   These costs were expensed on a unit-of-production basis.  As  of
     December 31, 2000 and 1999, the oil and gas producing activities of  TXU
     Europe  represented  less than 10% of consolidated  revenues,  operating
     profits and assets.

       TXU  Europe  capitalizes computer software costs  in  accordance  with
     Statement  of  Position  98-1, "Accounting for  the  Costs  of  Computer
     Software Developed or Obtained for Internal Use".  These costs are being
     amortized over a five-year period.  (See Note 20.)

       Valuation  of  long-lived assets - TXU Europe evaluates  the  carrying
     value  of goodwill and long-lived assets to be held and used when events
     and circumstances warrant such a review.  The carrying value of goodwill
     and  long-lived assets would be considered impaired when  the  projected
     undiscounted  cash  flows  are less than the carrying  value.   In  that
     event,  a  loss  will  be recognized based on the amount  by  which  the
     carrying  value  exceeds the fair market value.  Fair  market  value  is
     determined  primarily by available market valuations or, if  applicable,
     discounted cash flows.  As of December 31, 2000, there was no impairment
     of the valuation of long-lived assets, including goodwill.

       Goodwill  - Goodwill represents the excess of the purchase price  paid
     over  the  estimated fair value of the assets acquired  and  liabilities
     assumed for each company acquired and is being amortized over 20  to  40
     years, depending upon the circumstances.

       Derivative  financial  instruments - TXU Europe,  through  TXU  Europe
     Energy  Trading,  manages  its exposure to  commodity  price  risk  from
     existing  contractual  commitments and provides  price  risk  management
     services  to its customers through various financial instruments.   Such
     energy  management  comprises both non-trading and  trading  activities.
     Contracts  for  differences, electricity forward  agreements  and  other
     contracts  are  utilized to hedge the impact of market  fluctuations  on
     existing  assets or liabilities.  Gains and losses are included  in  the
     carrying  amounts  of  those assets or liabilities  and  are  ultimately
     recognized in income.  Gains and losses related to qualifying hedges  of
     firm  commitments  or  anticipated transactions  are  deferred  and  are
     recognized  in  income or as adjustments of carrying  amounts  when  the
     hedged  transactions  occurs.   The cash  flows  related  to  derivative
     financial  instruments are recorded in the same manner as the cash  flow
     related to the item being hedged.

       TXU  Europe,  through  its subsidiaries, in 1999 began  entering  into
     energy  contracts,  including  derivative  financial  instruments,   for
     trading   purposes.  Contracts  for  differences  and  other   financial
     instruments utilized in connection with trading activities are accounted
     for  using the mark-to-market method. Under this method, these financial
     instruments are adjusted to market value on the balance sheet,  and  the
     unrealized  gains  and  losses are included in revenues  in  the  income
     statement for that period.  (See Note 15.)

       TXU  Europe  enters  into interest rate swaps to  reduce  exposure  to
     interest  rate  fluctuations.  Amounts paid or received  under  interest
     rate  swap  agreements  are accrued as interest  rates  change  and  are
     recognized  over the life of the agreements as adjustments  to  interest
     expense.  Swaps, options and forward contracts are used to hedge foreign
     currency exposure.

       See  New  Accounting Standards below for the change in accounting  for
     derivatives effective January 1, 2001.

       Revenue   recognition  -  Electricity  and  gas  sales  revenues   are
     recognized  when  services  are provided to  customers  and  include  an
     estimate  for  unbilled revenues, or the value of  electricity  and  gas
     consumed  by customers between the date of their last meter reading  and
     the  period-end date.  As a result, unbilled revenues are subject  to  a
     degree  of estimation which can be significant.  Operating revenues  are
     stated  exclusive of value added tax, but inclusive of the  fossil  fuel
     levy.

       Restructuring  costs  -  Restructuring  costs  primarily   relate   to
     redundancy  costs  (severance benefits paid to  staff  under  retirement
     programs and related pension benefits) and other qualified costs of exit
     activities, generally recorded in Operation and Maintenance expense, and
     qualifying  asset  writedowns  which are  charged  against  depreciation

                                A-37

<PAGE>
     expense.    Redundancy  costs  relating  to  termination  benefits   are
     recognized in the period in which the employee accepts the offer and the
     amount can be reasonably estimated.

       Foreign  currencies  -  Assets  and liabilities  of  foreign  (non-UK)
    subsidiaries are translated at the exchange rate as of the balance  sheet
    date.   Revenues, costs and expenses are translated at average  rates  of
    exchange   prevailing   during  the  period.    Translation   adjustments
    resulting   from   this  process  are  charged  or  credited   to   other
    comprehensive income.  Gains and losses on foreign currency  transactions
    are included in other income - net.

       Income  taxes  -  Income tax expense includes UK  and  other  national
    income  taxes.  TXU Europe intends to reinvest the earnings of its non-UK
    subsidiaries into those businesses.  Accordingly, no provision  has  been
    made  for  taxes which would be payable if such earnings were distributed
    to TXU Europe.

       Deferred  income  taxes  are determined under  the  liability  method.
    Deferred  income taxes represent liabilities to be paid or assets  to  be
    received  in the future and reflect the tax consequences on future  years
    of  temporary differences between the tax bases of assets and liabilities
    and  their  financial reporting amounts.  Future tax rate  changes  would
    affect  those deferred tax liabilities or assets in the period  when  the
    tax rate change is enacted.

       Future  tax  benefits, such as net operating loss  carryforwards,  are
    recognized  to  the  extent that realization of  such  benefits  is  more
    likely than not.

       New  accounting standards -Statement of Financial Accounting Standards
    (SFAS)  No.  133,  "Accounting  for Derivative  Instruments  and  Hedging
    Activities", as extended by SFAS No. 137 (June 1999) and amended by  SFAS
    No.  138  (June 2000), is effective for TXU Europe beginning  January  1,
    2001.   SFAS  No. 133 establishes accounting and reporting standards  for
    derivative   instruments,   including  certain   derivative   instruments
    embedded  in  other contracts, and for hedging activities.   It  requires
    the  recognition of derivatives in the balance sheet and the  measurement
    of those instruments at fair value.

       All  derivatives  within TXU Europe have been identified  pursuant  to
    SFAS  No.  133  requirements.  TXU Europe has designated, documented  and
    assessed  derivative  hedging  relationships.   The  majority  of   those
    derivative  hedging relationships are cash-flow hedges that  require  TXU
    Europe  to  record  the derivative assets or liabilities  at  their  fair
    value  on its balance sheet with an offset in other comprehensive income.
    Future hedge ineffectiveness will be recorded in earnings.

       Certain  of TXU Europe's derivatives relate to its trading activities,
    which, for the most part, are not affected by the implementation of  SFAS
    No.  133.  TXU Europe accounts for such trading activities globally on  a
    mark-to-market basis.

       Ongoing  implementation  issues  currently  being  addressed  by   the
    Derivatives  Implementation Group (DIG) may  affect  the  application  of
    SFAS  No. 133.  In its normal course of business, TXU Europe enters  into
    commodity  contracts,  which include "swing"  components  for  additional
    purchases or sales of the underlying commodity. These contracts are  used
    by  TXU  Europe  and  its customers to provide some  of  their  commodity
    requirements.   TXU Europe has evaluated these contracts  and  determined
    that  they qualify for the normal purchases and sales exception  provided
    by  SFAS  No.  133.   In  October  2000,  the  DIG  reached  a  tentative
    conclusion  that option contracts, which could potentially include  these
    commodity "swing" contracts, do not qualify for such exception.   If  the
    FASB  approves  this  tentative  conclusion,  these  contracts  would  be
    required  to  be  accounted  for  as derivatives.   DIG  conclusions  are
    required to be prospectively applied only after FASB approval.

       Adoption  of  this accounting standard as of January 1, 2001  resulted
    in  the  recognition of pounds 173 million of derivatives as  assets  and
    pounds  231  million  of  derivatives as liabilities  with  a  cumulative
    effect   of  pounds  41  million  after-tax  as  a  decrease   to   other
    comprehensive  income.  TXU Europe is unable  to  determine  the  precise
    impact  related  to the commodity contracts discussed  above  until  such
    time  as  the  FASB  has approved the tentative DIG  conclusion  and  TXU
    Europe  has  had time to evaluate the effect.  TXU Europe estimates  that
    the  tentative  conclusion would increase other comprehensive  income  at
    January 1, 2001 by pounds 15 million after-tax.

    There are a number of issues pending before the DIG that may have an
    impact on the application of this statement. Management is unable to
    predict the outcome of these issues.

                                A-38

<PAGE>
       SFAS  No.  140,  "Accounting for Transfer and Servicing  of  Financial
    Assets  and Extinguishments of Liabilities", is effective for TXU  Europe
    for  transfers on or after April 2, 2001.  SFAS No. 140 replaces SFAS No.
    125.    SFAS   No.   140  revises  the  standards  for   accounting   for
    securitizations  and other transfers of financial assets  and  collateral
    and  requires  disclosures,  but carries over  most  of  SFAS  No.  125's
    provisions  without reconsideration.  TXU Europe is currently  evaluating
    the  impact  the  adoption of this standard will  have  on  its  sale  of
    receivables  program.  SFAS No. 140 requires TXU  Europe  to  incorporate
    certain disclosures about securitizations in the financial statements  at
    December 31, 2000.  These disclosures have been incorporated.

3.   CHANGE IN ACCOUNTING PRINCIPLE - DEPRECIATION

       In  the  quarter  ended September 30, 2000, TXU Europe  implemented  a
    change  in the depreciation method for its distribution system assets  as
    of  December  31,  1999.   Previously, distribution  system  assets  were
    depreciated at a rate of 3% per annum for 20 years and then 2% per  annum
    for  the  remaining  20 years.  A straight line depreciation  method  has
    been  implemented  to better recognize the cost of the  assets  over  the
    anticipated  useful life of the assets.  The cumulative  effect  of  this
    change in accounting principle on periods prior to December 31, 1999  was
    an  increase in net income of pounds 7 million (net of pounds  3  million
    in  deferred  taxes).   The  effect of the  change  for  the  year  ended
    December 31, 2000 was to increase net income by pounds 16 million  (after
    a reduction for income taxes of pounds 6 million).

       Results  for  the previous quarters of 2000 were restated  to  reflect
    the  increase  in  net  income resulting from the  adoption  of  the  new
    accounting  method.  (See Note 19.)  The pro forma amounts of  the  prior
    periods presented herein, assuming the change in depreciation method  had
    been  applied  retroactively to the beginning of each period,  would  not
    have differed significantly from the actual amounts presented.

       Also  in the quarter ended September 30, 2000, TXU Europe revised  the
    estimated  useful economic lives of its distribution system assets.  Such
    assets  are  now  depreciated over a composite  period  of  50  years  to
    reflect  the  age  profiles  underlying  the  current  asset  maintenance
    strategy.   The  effect of the change in estimate is not significant  for
    2000.

4.   RESTRICTED CASH

       At  December  31,  2000 and 1999, pounds 351 million  and  pounds  408
    million  of  deposits  were  used to cash-collateralize  existing  future
    lease  obligations to certain banks related to the funding of the  leases
    of  three  power stations from National Power PLC.  Additionally,  pounds
    317  million  and  pounds  326 million at December  31,  2000  and  1999,
    respectively,  were  used  to cash-collateralize  existing  future  lease
    obligations  arising  from cross-border leasing arrangements  on  several
    power  stations. (See Note 8.)  TXU Europe's investment in Eastern  Norge
    Svartisen AS (Svartisen) includes pounds 4 million of deposits which  was
    classified  as  restricted  cash  at  December  31,  2000.  TXU  Europe's
    investment  in Eastern Norge Kobbelv AS (Kobbelv) (see Note 5),  included
    pounds 6 million of deposits which were classified as restricted cash  at
    December 31, 1999.



                                A-39

<PAGE>

5.   INVESTMENTS

       Marketable  securities  investments are classified  as  available  for
    sale,  and  are considered non-current based upon management's intentions
    in  holding the investments.  Marketable securities investments consisted
    of the following:
<TABLE>
<CAPTION>

                                  Fair market       Unrealized
                   Cost              value          gain/(loss)
              --------------    ---------------   --------------
               December 31,       December 31,     December 31,
              --------------    ---------------   --------------
               2000     1999     2000     1999     2000     1999
              ------   -----    ------   ------   ------   -----
                               (pounds  million)
     <S>         <C>     <C>      <C>      <C>      <C>     <C>
     SME           -     31         -      20        -      (11)
     HC          277     49       273      49       (4)       -
               -----   ----      ----    ----     ----     ----
                 277     80       273      69       (4)     (11)
               =====   ====      ====    ====     ====     ====
</TABLE>

       At   December  31,  2000,  TXU  Europe  held  a  19.2%  investment  in
    Hidrocantabrico (HC in the table above), which is listed in  Spain.  (See
    Note  1.)  At  December 31, 1999, TXU Europe also held an  investment  in
    SME,  which is listed in the Czech Republic.  TXU Europe has not had  the
    ability  to  exercise significant influence over either Hidrocantabrico's
    or   SME's   operating   and  financial  policies;   accordingly,   these
    investments have been accounted for as marketable securities  and  marked
    to  market.   In August 2000, TXU Europe sold its investment in  SME  and
    the  amount  of  holding  gains that were previously  recorded  in  other
    comprehensive income has been reclassified as realized gains.  (See  Note
    1.)

       Non-marketable  investments at December  31,  2000  and  1999  consist
     principally  of  the investment in PVO and investments  in  the  offtake
     generated  from  water rights in hydro-electric power plants  in  Norway
     over  a  55 year period. The investment in PVO held by TXU Nordic Energy
     is  the  equivalent of a 14.7% ownership in PVO and is carried at  cost,
     which was approximately pounds 190 million at both December 31, 2000 and
     1999.   The water rights investments, Svartisen and Kobbelv, amounted to
     approximately pounds 141 million and pounds 145 million at December  31,
     2000 and 1999, respectively.  The carrying value at December 31, 1999 of
     an investment in the preferred stock of NTL Incorporated (NTL Inc.), the
     purchaser  of  TXU  Europe's telecoms business in 1998,  was  pounds  28
     million.  This investment was sold in 2000.

       Investments  accounted  for  by  the  equity  method,  including   the
     approximately  40% interest in SVO that was acquired in  November  1999,
     totaled pounds 71 million and pounds 63 million at December 31, 2000 and
     1999, respectively.  The remainder of SVO is currently owned by 29 local
     municipalities.    There   are   put   options   exercisable   by    the
     municipalities, which if exercised would automatically give  TXU  Europe
     Group a controlling stake.  (See Note 1.)

       The  remaining  other investments amounted to pounds  20  million  and
     pounds  25 million at December 31, 2000 and 1999, respectively  and  are
     carried at cost.

6.   RELATED PARTY TRANSACTIONS

       At  December  31, 2000 and 1999, the balance of pounds 52 million  and
     pounds  49 million, respectively, in the "Accounts payable - Affiliates"
     account arises primarily from payments of amounts by TXU Corp. on behalf
     of TXU Europe.

       The  10%  holding in TXU Finance of pounds 208 million and pounds  195
     million at December 31, 2000 and 1999, respectively, which is held by  a
     wholly-owned  subsidiary of TXU Corp., has been  included  in  "Minority
     Interest".


                                A-40

<PAGE>
7.   SHORT-TERM DEBT

       Short-  term  Debt - Weighted average interest rates at  December  31,
     2000  and  1999 on notes payable to banks, including accounts receivable
     securitization balances, is 5.95% and 5.15%, respectively.

       Short-term  Facilities  -  As of December 31,  2000,  TXU  Europe  had
    several  short-term facilities with commercial banks  which  provide  for
    borrowings  in  various currency denominations and  at  current  interest
    rates generally based on LIBOR.

<TABLE>
<CAPTION>




                                                                    Borrowings Under Facilities at
                                                                             December 31, 2000
                                                               ------------------------------------------
     Facilities                                                                                 Interest
   Expiration Date                  Facility Limits                     Outstanding              Rates
    ---------------         -------------------------------    ------------------------------- ----------
                                Currency          pound            Currency         pound
                                                 millions                          millions
     <S>                   <C>                      <C>        <C>                   <C>          <C>
     May 30, 2001          euros 250 million        158        euros 250 million     158          5.78%


     May 8, 2001           Czech Koruna (CzK)        27        CzK 1.3 billion        23          6.08%
                            1.5 billion

     August 22, 2001 (a)   pounds 300 million       300        euros 256 million     161          5.80%
      (a 364  - day         (multicurrency)
      revolving credit
      facility )

     March 2, 2003  (a)     pounds 150 million      150        pounds 150 million    150          6.28%
     (Eastern Electricity   (multicurrency)
     revolving credit
     facility)

<FN>
       (a)  In  connection with the new pounds 300 million 364 -day revolving
    credit  facility  entered into in August 2000, the limits  under  Eastern
    Electricity's  separate  revolving  credit  facility  were  reduced  from
    pounds 250 million to pounds 150 million.
</FN>
</TABLE>

       On  January  8,  2001,  TXU Europe borrowed an  additional  euros  182
    million (pounds 115 million) at 5.54% under the 364-day revolving  credit
    facility.    On  January  22,  2001,  the  pounds  150  million   Eastern
    Electricity revolving credit balance was repaid.

       Nordic  Finance  -  TXU Europe has a Euro term loan  facility  with  a
     commercial  bank  available  only to fund  the  investment  in  SVO.  At
     December  31,  2000,  there  was euros 50 million  (pounds  32  million)
     outstanding at an annual interest rate based on Euribor of 5.89%.

       Promissory  note  program - TXU Europe had a promissory  note  program
     with  two  facilities issued within the Czech Republic  which  had  been
     utilized  to  fund  its  investment in SME and Teplarny  Brno  a.s.   At
     December  31,  1999,  pounds  60  million  was  outstanding  under   the
     promissory  note program at an average annual interest  rate  of  6.96%.
     This amount was repaid in 2000 with the sale of TXU Europe's interest in
     SME.

       Accounts  receivable securitization - TXU Europe Group has  facilities
     with   Citibank  N.A.  to  provide  financing  through  trade   accounts
     receivable whereby Eastern Electricity may sell up to pounds 300 million
     of  its  electricity receivables and TXU Finance may  borrow  up  to  an
     aggregate   of   pounds  275  million,  which  is   treated   as   being
     collateralized by future receivables of Eastern Electricity,  through  a
     short-term note issue arrangement.  The program has an overall limit  of
     pounds  550  million. Eastern Electricity continually  sells  additional
     receivables to replace those collected. During 2000, Eastern Electricity
     sold  pounds 2,278million in receivables under the program.  Such  sales
     resulted in no gain or loss. Under the program, Eastern Electricity  has
     a receivables servicing obligation but does not incur a measurable asset
     or  liability.   At December 31, 2000 and 1999, accounts  receivable  of
     Eastern  Electricity of pounds 164 million and pounds  224  million  had

                                A-41

<PAGE>
     been  sold  under the program, respectively.  At December 31,  2000  and
     1999,  pounds  5  million  and  pounds 177 million,  respectively,  were
     reflected as other short-term loans on the balance sheet. These  amounts
     bear  interest at an annual rate based on commercial paper rates plus  a
     margin,  which  was  6.02%  and 5.63% at December  31,  2000  and  1999,
     respectively.

8.   LONG-TERM DEBT

       Long-term debt consisted of the following:

<TABLE>
<CAPTION>


                                                                 December 31,
                                                             ------------------
                                                               2000        1999
                                                             ------      ------
                                                              (pounds  million)
     <S>                                                      <C>         <C>
     Notes and Bonds:
       $200 million 7.425% guaranteed notes due 2017            134         124
       $300 million 7.55% guaranteed notes due 2027             201         186
       pounds 350 million 8.375% bonds due 2004                 363         367
       pounds 200 million 8.5% bonds due 2025                   225         227
       pounds 200 million 8.75% bonds due 2012                  234         235
       $350 million 6.15% Exchange Senior Notes due 2002        234         217
       $650 million 6.45% Exchange Senior Notes due 2005        435         402
       $500 million 6.75% Exchange Senior Notes due 2009        335         309
       7.25% Norwegian Kroner bonds due 2029                     75          77
       EMTN Notes:
           7.25% Sterling Eurobonds due 2030                    275           -
           6.88% EMTN Notes due 2001                            100           -
           35 PUT 5 Resettable Notes due 2035 - 7.79%           301           -
     Other:
       Sterling Credit Agreement - due 2003:
         Term facility - 6.81% and 6.55%                        750         750
         Tranche B revolving credit:
             Spanish pesatas - 4.33%                              -          47
             Norwegian kroner - 8.10%  and 7.13%                 53          54
             Pounds  sterling - 6.61%                             -          75
             Euro's - 5.80% and 4.04%                           168          61
       Rent factoring loans (weighted average
         interest rate of 7.35%, due 2001)                      190         428
       Other unsecured loans, due in installments
         (weighted average rates range from 5.84% - 8.86%       120         114
         and 4.95% - 10.8%)
       Capital leases                                           745         924
       CHPL project finance - Shotton                            87           -
       Cross-border leases (US$ denominated)                    317         316
       Other                                                      -           6
                                                             ------      ------
     Total long-term debt                                     5,342       4,919
     Less current portion                                       862         380
                                                             ------      ------
     Long-term debt, less amounts due currently               4,480       4,539
                                                             ======      ======
</TABLE>


       Lines of credit

       At  December 31, 2000, TXU Europe has a euros 2.0 billion Euro  Medium
    Term  Note (EMTN) program, under which TXU Europe may from time  to  time
    issue  notes  in various currencies.  On November 30, 2000,  a  financing
    subsidiary  of  TXU  Europe  issued  pounds  301  million  of  35  Put  5
    Resettable  Notes  due 2035 (Resettable Notes) under  the  EMTN  program.
    The  net  proceeds were used to pay down pounds 50 million of EMTN  Notes
    due 2007 with the remainder being held at year end December 31, 2000,  to
    finance  the  repayment of the rent factoring agreement in  January  2001
    and  for  other  corporate purposes. The initial  interest  rate  on  the
    Resettable  Notes, up to the first reset date of November  30,  2005,  is
    7.7875%.   The  issuer  of the Resettable Notes  has  a  call  option  to
    repurchase the Resettable Notes at par on November 30, 2005.   This  call
    option  has  been  assigned to commercial banks for  a  consideration  of
    approximately  pounds 5 million per annum for five years. The  Resettable

                                A-42

<PAGE>
    Notes  also  include a put option that is exercisable at 5 years  by  the
    holder  and  a  reset  feature that permits the holder  to  remarket  the
    Resettable  Notes  at  a  different interest  rate  if  the  put  is  not
    exercised.   On the reset date, the new interest rate will be  determined
    in  accordance with the terms of the Resettable Notes for the next  6  to
    20  years.   The  Resettable  Notes can be  redeemed  at  principal  plus
    accrued interest on November 30, 2005.

       As  of  December 31, 2000, there was also pounds 275 million in  7.25%
    Sterling  Eurobonds  due March 8, 2030 and pounds 100  million  of  6.88%
    EMTN Notes due September 4, 2001 outstanding under the EMTN program.

       At  December 31, 2000, TXU Europe and TXU Finance (No.2) Limited  have
    a  joint  sterling-denominated line of credit with  a  group  of  banking
    institutions   under  a  credit  facility  agreement   (Sterling   Credit
    Agreement).   As  of  December  31, 2000,  the  amended  Sterling  Credit
    Agreement provides for borrowings of up to pounds 1.075 billion  and  has
    two  facilities:  a pounds 750 million term facility  and  a  pounds  325
    million  revolving credit facility (Tranche B), both of  which  terminate
    on  March  2, 2003.  The Sterling Credit Agreement allows for  borrowings
    in  various currencies with interest rates based on the prevailing  rates
    in  effect in the countries in which the borrowings originate.  In August
    2000,  a  new  364  -  day facility to provide short-term  financing  was
    entered  into.   (See Note 7.) As of December 31, 2000,  the  outstanding
    Tranche  B borrowings and interest rates in effect at December  31,  2000
    consisted  of 700 million Norwegian kroner (NOK) (pounds 53  million)  at
    8.10%  per  annum  and euro 267 million (pounds 168 million)  at  5.80%
    per annum.

       On  January  8, 2001, in connection with the acquisition of  Kiel  AG,
    TXU  Europe borrowed an additional euros 229 million (pounds 145 million)
    at 5.54% per annum (euros 47 million (pounds 30 million) under Tranche  B
    and  euros182  million (pounds 115 million) under the 364-day  facility).
    An  additional  NOK  50  million (pounds 4 million)  was  borrowed  under
    Tranche B on January 15, 2001.

       Other long-term debt

       TXU  Europe has a pounds 143 million project finance facility  to  pay
     for  the  construction  of  the power station being  built  for  Shotton
     Combined Heat and Power.  The station is due to be completed during  the
     third  quarter of 2001.  Repayment on the loan begins six  months  after
     the  earlier  of  the  completion date or November  15,  2001  and  will
     continue  over  the next 15 years.  As of December 31, 2000,  there  was
     outstanding  drawings of pounds 85 million under this  facility  bearing
     interest  at  a rate based on LIBOR plus a margin, which was  6.85%  per
     annum.

       Maturities  -  Long-term  debt,  as of  December  31,  2000  excluding
    capital lease balances, is repayable as follows:

<TABLE>
<CAPTION>


                                                 December 31,
                                               ----------------
                                               (pounds million)
     <S>                                            <C>
     2001                                             292
     2002                                             264
     2003                                             981
     2004                                             396
     2005                                             757
     Thereafter                                     1,907
                                                   ------
     Long-term debt, excluding capital leases       4,597
     Capital leases                                   745
                                                   ------
     Total long-term debt                           5,342
                                                   ======

</TABLE>

       TXU  Europe's  debt  agreements contain certain  covenants,  including
     leverage  ratios,  levels  of  net assets  and  interest  coverage.   At
     December  31, 2000 and 1999, TXU Europe was in compliance with all  such
     covenants.


                                A-43

<PAGE>

       Capital  lease  obligations - As at December 31, 2000  future  minimum
     lease  payments  for  assets  under capital leases,  together  with  the
     present value of minimum lease payments, were:




                                             December 31
                                            -------------
                                           (pounds million)

     2001                                        405
     2002                                         23
     2003                                         21
     2004                                         21
     2005                                         21
     Thereafter                                  172
                                              ------
     Total future minimum lease payments         663
     Less amounts representing interest         (113)
                                              ------
     Present value of future minimum
       lease payments                            550
                                              ------
     Current                                     374
     Non-current                                 176
                                              ------
     Total                                       550
                                              ======

       Substantially  all of the capital lease obligations  relate  to  coal-
     fired power stations.  Additional payments of approximately pounds 6 per
     megawatt  hour (indexed from 1996 prices) linked to output  levels  from
     the stations were payable (under the original lease terms) for the first
     seven  years  of  their  operations  by  TXU  Europe  Group  (operations
     commenced  in  1996).   In  accounting for the  acquisition  of  TEG,  a
     liability  for  the  estimated probable additional  payments  linked  to
     output  levels  for coal-fired generating stations was established.   At
     December  31, 2000 and 1999, the balance of the liability of pounds  196
     million  and pounds 291 million, respectively, is included with  capital
     lease obligations, of which pounds 196 million and pounds 95 million are
     classified  as  current,  respectively.  As of December  31,  2000,  TXU
     Europe Group held a 99-year lease over the land, buildings and plant  at
     three  power  stations and had the right to purchase the  freehold  land
     after 50 years at a purchase price of pounds 1.  During 2000, TXU Europe
     Group  reached an agreement to prepay (effective January 2001) in  fixed
     amounts, the future payments linked to output levels from these stations
     that  previously  had  been  payable over periods  to  March  2003.   In
     addition, an option was granted to TXU Europe Group to bring forward the
     right  to  purchase the freehold land, previously exercisable  after  50
     years.   TXU Europe Group exercised the option to purchase the  freehold
     in  January  2001.   At  that time, remaining  outstanding  fixed  lease
     payments  became  financial obligations to a third  party  and  will  be
     settled during 2001.  The National Power leases have been accounted  for
     as capital leases.

       Cross-border  leases - Certain subsidiaries of TXU Europe  Group  have
     entered  into  cross-border lease transactions in respect of  two  power
     stations  that are wholly owned by TXU Europe.  TXU Europe has  retained
     control  of  the power stations and their output and is responsible  for
     their  operations. The debt arising on the cross-border leases is  fully
     collateralized by restricted cash on deposit. (See Note 4.)

       Rent  factoring loans - Prior to the acquisition of TEG by  TXU  Corp.
     in  1998,  certain subsidiaries of TXU Europe entered into an  agreement
     with   commercial  banks  whereby  future  intra-group  rental  payments
     receivable  were assigned to these banks in return for a sum  of  pounds
     1,097  million.   As  of December 31, 2000, the balance  of  the  rental
     payments  due to the banks was pounds 190 million, which was fully  paid
     in January 2001.

       At  December  31,  2000 and 1999, pounds 351 million  and  pounds  408
     million  of  the  capital  sums were on deposit  to  cash  collateralize
     existing  future lease obligations to another group of banks related  to
     the  funding of the leases of three power stations leased from  National
     Power.  (See Note 4.)

                                A-44

<PAGE>

9.   PREFERRED SECURITIES OF SUBSIDIARY PERPETUAL TRUST

       In  March  2000,  TXU  Europe Capital I, a statutory  business  trust,
     established  as  a  financing  subsidiary  for  TXU  Europe,  issued  to
     investors  US$150 million (pounds 95 million) of 9 3/4% Trust Originated
     Preferred  Securities (Preferred Trust Securities), in 6,000,000  units.
     In  a  series  of related transactions, the proceeds from this  issuance
     were  invested in Preferred Partnership Securities issued by TXU  Europe
     Funding  I,  L.P.,  a limited partnership of which  TXU  Europe  is  the
     general partner.  TXU Europe Funding I, L.P. in turn, used those  funds,
     along with a capital contribution of approximately US$26 million (pounds
     16  million) from TXU Europe, to purchase junior subordinated debentures
     issued  by  TXU  Eastern  Funding Company and  TXU  Europe  Group.   The
     Preferred  Trust Securities have a liquidation preference of  US$25  per
     unit.   The  only  assets  of  the trust are the  Preferred  Partnership
     Securities.  The  Trust has a perpetual existence,  subject  to  certain
     termination  events  as  provided  in its  Amended  and  Restated  Trust
     Agreement.   The  Preferred Trust Securities are  subject  to  mandatory
     redemption  upon payment of the Preferred Partnership Securities,  which
     may  be  redeemed at the option of TXU Europe, in whole, or in part,  at
     any  time  on  or  after March 2, 2005. TXU Europe  has  issued  certain
     limited  guarantees  of  the Preferred Trust Securities,  the  Preferred
     Partnership  Securities and the junior subordinated debentures  held  by
     TXU Europe Funding I, L.P.  The trust uses distributions it receives  on
     the  Preferred Partnership Securities to make cash distributions on  the
     Preferred Trust Securities.


10.  SHAREHOLDER'S EQUITY

       TXU  Europe  has  two  classes  of shares  outstanding,  ordinary  and
     deferred.   Both  classes are held by wholly owned subsidiaries  of  TXU
     Corp.   Ordinary  shares, which are US dollar denominated,  have  voting
     rights.  The  deferred  shares,  which  are  denominated  in  UK  pounds
     sterling,   have   no  rights  to  vote  or  receive  dividends.    Upon
     liquidation, holders of deferred shares are entitled to receive pounds 1
     per  share  only  after holders of ordinary shares are paid  pounds  100
     million  per share.  In addition, all deferred shares may be repurchased
     for the sum of pounds 1.

       Certain debt instruments of TXU Europe contain provisions that,  under
     certain conditions, restrict distributions on or acquisitions of  common
     stock.   At  December  31,  2000 and 1999, retained  earnings  were  not
     restricted as a result of such provisions.

11.  PROVISION FOR UNFAVORABLE CONTRACTS

       As   part  of  the  purchase  accounting  for  TEG,  TXU  Europe  made
     provisions   for  certain  unfavorable  long-term  gas  and  electricity
     purchase  contracts.  As of December 31, 2000 and 1999, the  electricity
     provision  related  to a contract that expires in 2009,  while  the  gas
     provision relates to two contracts that expire in 2010.

       With  the acquisition of Norweb Energi in August 2000, TXU Europe also
    assumed  certain  of  Norweb Energi's obligations,  including  its  power
    purchase  agreements. Some of these agreements provide for  purchases  of
    power  by  TXU  Europe  at prices were currently  above  market.    As  a
    result,  TXU  Europe recorded a liability for the fair value  adjustments
    for  these  unfavorable power purchase agreements of pounds  451  million
    and pounds 19 million for related contracts for differences.

       During 2000 and 1999, an aggregate of pounds 27 million and pounds  46
     million,  respectively,  of these provisions  were  released  to  offset
     expenses recognized on purchases under unfavorable electricity  and  gas
     contacts.  In  December  1999, TXU Europe  paid  pounds  76  million  in
     termination  fees  to  exit a disadvantageous contract.   There  was  no
     income   effect   as  this  amount  matched  the  liability   previously
     established against this contract.

12.  PENSIONS

       The  majority  of  TXU  Europe  Group employees  are  members  of  the
     Electricity Supply Pension Scheme (ESPS), which provides pensions  of  a
     defined  benefit nature for employees throughout the England  and  Wales
     Electricity Supply Industry. The ESPS operates on the basis  that  there
     is  no  cross-subsidy between employers, and the financing of TXU Europe
     Group's pension liabilities is, therefore, independent of the experience
     of  other participating employers. The assets of the ESPS are held in  a

                                A-45

<PAGE>
     separate  trustee-administered fund and consist principally  of  UK  and
     European  equities,  UK property holdings and cash.   The  pension  cost
     relating  to  the TXU Europe Group portion of the ESPS  is  assessed  in
     accordance with the advice of independent qualified actuaries using  the
     projected  unit  method. The benefits under these  plans  are  primarily
     based  on years of service and compensation levels as defined under  the
     respective plan provisions.

       The  pension information presented below has been adjusted to  reflect
     the  impact  of the following events during 2000: the sale  of  metering
     business (May 2000), the acquisition of Norweb Energi (August 2000)  and
     the related transfer of customer services personnel to Vertex (September
     2000).  (See  Note  1.)  As a result of these events there  has  been  a
     significant  movement of employees out of and into the  pension  scheme.
     The  net effect of these curtailments and settlements was a loss of less
     than pounds 1 million for 2000.

     <TABLE>
     <CAPTION>
                                                          Year Ended  December 31,
                                                         -----------------------
                                                           2000           1999
                                                         --------       --------
                                                            (pounds  million)
     <S>                                                  <C>            <C>
     Change in benefit obligation:
     Benefit obligation at beginning of year                979            985
     Service cost                                            16             15
     Interest cost                                           58             53
     Participants' contributions                              9             10
     Plan amendments                                          -             19
     Actuarial (gain) loss                                  (32)           (56)
     Termination liabilities                                 17             10
     Benefits paid                                          (58)           (54)
     Effect of curtailments                                  (2)             -
     Net transfer of obligations from (to) other plans       20             (3)
                                                         ------          -----
     Ending benefit obligation                            1,007            979
                                                         ======          =====

     Change in plan assets:
     Fair value of plan assets at beginning of year       1,167          1,082
     Actual return on plan assets                             -            107
     Employer contribution                                   23             25
     Participants contributions                               9             10
     Benefits paid                                          (58)           (54)
     Net transfer of assets from (to) other plans            23             (3)
                                                         ------          -----
     Ending fair value of plan assets                     1,164          1,167
                                                         ======          =====

     Funded status:
     Funded status                                          157            188
     Unrecognized net actuarial loss                         83             43
     Unrecognized prior service cost                         17             19
                                                         ------          -----
     Prepaid  benefit cost                                  257            250
                                                         ======          =====

     Weighted average assumptions:
     Discount rate                                         6.0%           6.0%
     Expected return on plan assets                        6.75%          6.5%
     Rate of compensation increase                         3.5%           3.5%
</TABLE>


                                A-46

<PAGE>
<TABLE>
<CAPTION>


                                                                 Period from
                                                   Year Ended     Formation    Period from
                                                  December 31,     Through     April 1, 1998
                                              ----------------   December 31,    Through
                                               2000      1999       1998       May 18, 1998
                                              ------    ------   -----------   -------------
                                                         (pounds  million)
     <S>                                        <C>       <C>       <C>            <C>
     Components of net periodic pension
       cost (benefit):
     Service cost                                16        15         7              1
     Interest cost                               58        53        33              7
     Expected return on plan assets             (80)      (63)      (45)           (10)
     Net amortization                             2         4         -              -
     Net curtailments/settlement gain            (1)        -         -              -
                                              -----      ----      ----           ----
         Net periodic pension cost (benefit)     (5)        9        (5)            (2)
                                              =====      ====      ====           ====
</TABLE>

       In  addition,  TXU  Europe  has a defined contribution  pension  plan.
     Contributions made by TXU Europe to the plan were pounds 813 thousand in
     2000,  pounds 827 thousand in 1999 and pounds 490 thousand in the period
     from formation to December 31, 1998.

13.  EMPLOYEE SHARE PLANS

       During  1998,  TXU Europe instituted the TXU Europe  Group  Long  Term
     Incentive Plan (LTIP) which is administered by a remuneration committee.
     Awards  of  "phantom  stock" in TXU Corp. under the  LTIP  may  be  made
     available  to  the  management  group,  senior  managers  and   salaried
     directors of TXU Europe.  There is no exercise price associated with the
     awards.  Participants of the LTIP receive awards based on the number  of
     shares  that  a  specified percentage of their annual  basic  pay  could
     purchase,  using the stock price of TXU Corp. at or around the  date  of
     grant.  If  participants leave TXU Europe before the awards vest,  their
     awards lapse.

       Awards  are subject to achieving certain performance criteria.   There
     is  a deferral period from the end of the financial period in which  the
     awards  were granted during which the participants must remain with  TXU
     Europe  for  their awards to become vested.  For the awards  granted  in
     1998,  the  deferral period for directors is one year.  For  the  senior
     managers,  one-half of each award vested on January 1,  2000,  with  the
     balance  of  the  awards vesting on January 1,  2001.   For  the  awards
     granted in 2000 and 1999, the deferral period for directors is one  year
     and for the management group and senior managers is two years.

       At  the  end  of  the deferral period, TXU Europe  shall  pay  to  the
     participant, in cash, an amount equal to the higher of the  stock  price
     of  TXU  Corp. at the end of the deferral period, or a guaranteed price.
     The  guaranteed  price is the stock price used to calculate  the  awards
     granted, adjusted for interest at 6% compounded annually up to the  date
     of payment, and accumulated dividends.

       TXU  Europe granted 168,461 awards in 2000, 190,820 awards in 1999 and
     145,878  awards on September 1, 1998.  For grants during 2000  and  1999
     the  stock price of TXU Corp. on the date of grant was pounds 21.971 and
     pounds  28.06, respectively.  For grants during the period May 19,  1998
     through  December 31, 1998 the stock price of TXU Corp. at May 19,  1998
     of pounds 23.81 was utilized. The weighted average remaining contractual
     life  of awards outstanding at December 31, 2000 and 1999 was 22  months
     and 18 months, respectively.  At December 31, 2000 and 1999, the closing
     market  price  of TXU Corp. common stock was $43.06 (pounds  28.83)  and
     $35.56 (pounds 22.00), respectively, per share.

       In  addition, TXU Europe also has the following employee  share  plans
     (adopted in 1999):

    (a)  The TXU Europe Group Sharesave Scheme which is available to the UK-
         based  directors and employees of TXU Europe Group who devote  more
         than 25 hours a week to their duties.  Employees who participate in
         this  scheme  enter into a monthly savings contract, for  either  a
         three-  or  five-year  period.  At  the  end  of  that  period,   a

                                A-47

<PAGE>
         participant  may  elect  to apply the savings  accumulated  to  the
         purchase  of shares of TXU Corp. common stock.  The exercise  price
         for the three-year Sharesave Scheme was based on a 15% discount  of
         the TXU Corp. stock price of pounds 25.82 on or about July 16, 1999
         (the  initial  invitation date or grant date)  and  the  five  year
         Sharesave Scheme exercise price was based on a 20% discount.

    (b)  The TXU Europe Group Loyalty Reward Scheme, provides for grants for
         the issuance of additional shares of TXU Corp. common stock to
         participants in the Sharesave Scheme subject to the exercise of
         options, and in proportion to the number of shares of stock acquired.

     The changes in share awards outstanding were as follows:

<TABLE>
<CAPTION>



                                                                                        Long-term
                                   Sharesave    Sharesave   Loyalty     Loyalty   Long-term    Incentive
                                    Scheme       Scheme     Reward      Reward    Incentive   Compensation
                                   3 Years      5 Years     3 Years     5 Years      Plan         Plan
                                   --------     ---------   -------     -------   ----------  ------------
   <S>                              <C>       <C>           <C>        <C>         <C>          <C>
   Balance - May 19, 1998                -            -          -           -           -           -
     Granted                             -            -          -           -     145,878           -
     Lapsed                              -            -          -           -      (1,785)          -
                                   --------   ---------    -------    --------    --------     -------
   Balance - December 31, 1998           -            -          -           -     144,093           -
                                   --------   ---------    -------    --------    --------     -------
     Granted                        201,046   1,132,083     29,517     225,584     190,820      26,761
     Lapsed                               -           -          -           -     (27,178)          -
                                   --------   ---------    -------    --------    --------     -------
   Balance - December 31, 1999      201,046   1,132,083     29,517     225,584     307,735      26,761
                                   --------   ---------    -------    --------    --------     -------
     Granted                              -           -          -           -     168,461      52,291
     Lapsed                         (93,627)   (531,284)   (13,800)   (105,994)    (24,999)    (21,297)
     Exercised                      (13,436)    (50,778)    (1,889)     (9,941)    (90,429)          -
                                   --------   ---------    -------    --------    --------     -------
   Balance - December 31, 2000       93,983     550,021     13,828     109,649     360,768      57,755
                                   ========   =========    =======    ========    ========     =======

   Exercisable - 2001                     -           -          -          -       47,102           -
   Exercisable - 2002                93,983           -     13,828          -      170,204           -
   Exercisable - thereafter               -     550,021          -    109,649      143,462      57,755

 Weighted average exercise price:
   (in pounds )
   Exercised                          21.95       20.66          -          -        24.22           -
   Outstanding                        21.95       20.66          -          -        25.07       29.00

 Weighted average fair value of
   awards granted in:
     (in pounds )

   2000                                   -           -          -          -         5.29       29.67

   1999                                8.41       11.37      25.82      25.82         5.76       26.67

   1998                                   -           -          -          -         4.28           -


</TABLE>

       In  May  2000 and June 1999, awards of performance-related  restricted
     stock  of TXU Corp. were made to certain officers and directors  of  TXU
     Europe under the Long-Term Incentive Compensation Plan of TXU Corp.  The
     awards represented 52,291 shares and 26,761 shares, respectively, of TXU
     Corp.  common  stock with a valuation price of pounds 29.67  and  pounds
     26.675  per  share  at the date of grant, which were issued  subject  to
     performance and vesting requirements over a three- to five-year period.

       Total  compensation  expense  recognized under  the  various  employee
     share  plans  for  2000 and 1999 and the period from  formation  through
     December  31, 1998 were pounds 8 million, pounds 7 million and pounds  1
     million, respectively.

                                A-48

<PAGE>
       TXU  Europe  applies  Accounting  Principles  Board  Opinion  No.   25
     "Accounting  for  Stock Issued to Employees" and related Interpretations
     in  accounting  for its employee share plans. TXU Europe determined  the
     potential   impact  of  SFAS  No.  123,  "Accounting   For   Stock-Based
     Compensation"  with  regard to the recognition of compensation  expense.
     Under  SFAS 123, compensation expense is determined based upon the  fair
     value  at the grant date for awards.  Had compensation expense  for  TXU
     Europe  employee share plans been determined based upon the  methodology
     prescribed  under  SFAS 123, TXU Europe's income  would  not  have  been
     significantly different from actual results.


14.  TAXATION

       The components of TXU Europe's income tax expense are as follows:

<TABLE>
<CAPTION>


                                                        Period from
                                       Year Ended        Formation       Period From
                                        December 31,      Through       April 1, 1998
                                    -----------------    December 31,      Through
                                      2000      1999        1998         May 18, 1998
                                    -------    ------   -------------  --------------
                                              (pounds  million)
     <S>                             <C>         <C>         <C>             <C>
     Current:
      UK                                -         21          24               2
      US                              (18)         -          18               -
      Other Countries                   7          1           1               -
                                    -----      -----       -----           -----
                                      (11)        22          43               2
     Deferred:
      UK                               73         89          24              (7)
      Other Countries                   8          -           -               -
                                    -----      -----       -----           -----
        Total income tax expense       70        111          67              (5)
                                    =====      =====       =====           ======

</TABLE>

       The  components  of TXU Europe's deferred tax assets  and  liabilities
     are as follows:

<TABLE>
<CAPTION>
                                                       December 31,
                                                   --------------------
                                                    2000          1999
                                                   -------       ------
                                                     (pounds  million)
     <S>                                             <C>           <C>
     Deferred tax assets:
       Leased assets and related items               242           313
       Tax loss carryforwards                         23            10
       Provision for unfavorable contracts
         and other                                   245           100
                                                  ------        ------
         Total deferred tax assets                   510           423

     Valuation allowance fordeferred
       tax assets                                   (160)         (162)
                                                  ------        ------
         Net deferred tax assets                     350           261
                                                  ------        ------
     Deferred tax liabilities:
       Excess of book value over taxation
         value of fixed assets                       206           194
       Leased assets and related items               288           302
       Other items                                   323           174
                                                  ------        ------
         Total deferred tax liabilities              817           670
                                                  ------        ------
         Net deferred tax liabilities                467           409
                                                  ======        ======
</TABLE>


                                A-49

<PAGE>
       The  recognized  deferred tax asset is based upon the expected  future
     utilization  of  net operating loss carryforwards and  the  reversal  of
     other  temporary  differences.  TXU Europe has  recognized  a  valuation
     allowance  for those benefits for which realization does  not  meet  the
     more  likely  than  not  criteria.  The  valuation  allowance  has  been
     recognized in respect of leased assets.  TXU Europe continually  reviews
     the  adequacy  of  the  valuation allowance  and  is  recognizing  these
     benefits only as reassessment indicates that it is more likely than  not
     that the benefits will be realized.

       There was no valuation allowance at formation (February 5, 1998).   At
     the date of acquisition of TEG (May 19, 1998), a valuation allowance  of
     pounds  130 million, was established for the deferred tax asset for  the
     book/tax   capital  asset  related  to  leased  assets.   The  valuation
     allowance was increased by pounds 8 million in the period from  May  19,
     1998  to December 31, 1998, resulting in a balance of pounds 138 million
     at  December  31,  1998.   For the year ended  December  31,  1999,  the
     valuation allowance was increased by pounds 24 million, resulting  in  a
     balance  of  pounds 162 million at December 31, 1999 and  for  the  year
     ended  December  31,  2000  there was a  release  of  pounds  2  million
     resulting in the ending balance of pounds 160 million.

       Income before income taxes:
<TABLE>
<CAPTION>



                                                        Period from
                                       Year Ended        Formation       Period From
                                        December 31,      Through       April 1, 1998
                                    -----------------    December 31,      Through
                                      2000      1999        1998         May 18, 1998
                                    -------    ------   -------------  --------------
                                              (pounds  million)
     <S>                              <C>        <C>        <C>            <C>
     Income before income
       taxes:
      UK                               154       264         103            (27)
      US                                 -         -          51              -
      Other Countries                   52         3           1              1
                                     -----     -----       -----          -----
    Total income before income
     taxes and minority interest       206       267         155            (26)
                                     =====     =====       =====          =====
</TABLE>

       United  Kingdom  income  tax  expense at the  statutory  tax  rate  is
     reconciled below to the actual income tax expense:
<TABLE>
<CAPTION>


                                                                    Period from
                                                   Year Ended        Formation       Period From
                                                    December 31,      Through       April 1, 1998
                                                -----------------    December 31,      Through
                                                  2000      1999        1998         May 18, 1998
                                                -------    ------   -------------  --------------
                                                          (pounds  million)
    <S>                                                            <C>       <C>          <C>           <C>
    Tax at UK statutory rate (30%
     in 2000 and 1999 and 31%
       for all other periods)                       62        81           48            (8)
     Non-deductible goodwill and depreciation       30        26           16             1
     Effect of overseas tax rates                    -         -            2             -
     Effect of tax rate on UK dividends              -         -           (4)            -
     Tax rate change                                 -         -           (8)            -
     Distribution on preferred securities           (2)        -            -             -
     Resolution of prior year tax matters          (18)        -            -             -
     Movement in valuation allowance charged
      to expense                                    (2)       10            8             2
     Other                                          (6)       (8)           -             -
     Non-deductible expenses                         6         2            5             -
                                                 -----     -----        -----         -----
     Income tax expense                             70       111           67           (5)
                                                 =====     =====        =====         =====
</TABLE>
                                A-50

page>

       At  December  31,  2000 and 1999, TXU Europe has  net  operating  loss
     carryforwards  of pounds 23 million and pounds 10 million, respectively,
     that  are  available to offset future taxable income.  The net operating
     loss carryforwards have no expiration date.

       On  July  31, 1998, legislation was enacted that decreased the  United
     Kingdom  statutory income tax rate on companies by 1% with  effect  from
     April  1, 1999.  In accordance with the provisions of SFAS No. 109,  the
     assets  and  liabilities  for deferred income  taxes  were  adjusted  to
     reflect  the expected reversal of certain temporary differences  at  the
     lower income tax rate.

       The  tax  effect  of  the  components included  in  accumulated  other
     comprehensive income for the year ended December 31, 2000 was  pounds  2
     million  and  for the year ended December 31, 1999, for the period  from
     formation  through December 31, 1998, and for the period from  April  1,
     1998  through May 18, 1998 was a tax benefit of pounds 3 million, pounds
     2 million and pounds 1 million, respectively.

15.  DERIVATIVES AND FINANCIAL INSTRUMENTS

       TXU  Europe is exposed to a number of different market risks including
     changes  in  gas  and  electricity prices, interest  rates  and  foreign
     currency  exchange rates.  TXU Europe has developed a control  framework
     of  policies and procedures to monitor and manage the exposures  arising
     from  volatility  in  these markets.  To implement  these  policies  and
     procedures,  TXU  Europe enters into various derivative  instruments  to
     reduce its exposure to fluctuations in energy commodity prices, interest
     rates and foreign exchange rates.  Derivative financial instruments used
     by TXU Europe include electricity contracts for differences, electricity
     forward  agreements, swaps, options, futures, interest  rate  swaps  and
     forward rate agreements, and foreign exchange futures, swaps and forward
     purchase  contracts.    Both  the energy  management  and  the  treasury
     operations  make  use of these instruments, where such  instruments  are
     authorized for use.

       Electricity price risk management - TXU Europe Energy Trading  engages
     in  price  risk  management  activities for  non-trading  purposes  and,
     beginning in late 1999, for trading purposes.

       Non-trading activities

       UK  Electricity - Electricity forward contracts are primarily used  by
     TXU  Europe  to hedge its exposure to future fluctuations in electricity
     Pool  prices in the UK.  Under the current operating environment in  the
     UK,  almost all electricity generated in England and Wales must be  sold
     to  the  wholesale  electricity trading market in  the  UK  (Pool),  and
     electricity suppliers must likewise generally buy electricity  from  the
     Pool for resale to their customers.

       The  contracts  bought  and  sold are contracts  for  differences  and
     electricity forward agreements that fix the price of electricity for  an
     agreed  quantity  and duration by reference to an agreed  strike  price.
     Electricity  forward agreements are similar in nature to  contracts  for
     differences, except that they tend to last for shorter time periods  and
     are  based  on  standard industry terms rather than  being  individually
     negotiated.  Long-term Contracts for differences are in place to hedge a
     portion of the electricity to be purchased through 2009.  The impact  of
     changes  in the market value of these contracts, which serve as  hedges,
     is deferred until the related transaction is completed.

       TXU  Europe  Energy  Trading  has  also  entered  into  a  number   of
     agreements  with  third  parties, under which  it  makes  a  variety  of
     payments  related to a notional capacity of plant, fuel consumption  and
     operations in exchange for the receipt of revenues related to prevailing
     Pool  prices for a notional output.  Certain of these contracts are used
     for  hedging purposes, and the impact of changes in the market value  of
     the contracts is deferred until settlement occurs under the contract.

       The  fair values of outstanding contracts for differences, electricity
     forward agreements and other contracts held for non-trading purposes  at
     December  31,  2000 were out-of-the-money (negative) pounds 589  million
     compared  with in-the-money fair values (positive) of pounds 76  million
     at  December 31, 1999, calculated as the difference between the expected
     value  of  the contracts for differences, electricity forward agreements
     and  other contracts and the current market value, based on an  estimate
     of  forward  prices for the term of the CfD, EFA or other contract.  The

                                A-51

<PAGE>
     decrease  in  fair values from 1999 primarily reflects a decline  in  UK
     Pool  prices and a lengthening of the portfolio position.   At  December
     31, 2000, the outstanding notional quantity of all electricity commodity
     instruments under contracts held for non-trading purposes was 358 TWh of
     electricity  for  periods to 2018.  The market  for  the  contracts  for
     differences  and  electricity forward agreements  held  for  non-trading
     purposes  has  not  been  liquid  to  date  and  there  is  no   readily
     identifiable  market  through  which  the  majority  of  contracts   for
     differences or electricity forward agreements could be realized  through
     an exchange.

       UK  Gas  and Coal  - In order to help meet the expected needs  of  its
    natural  gas wholesale and retail customers and the fuel requirements  of
    its  power stations, TXU Europe Group has entered into a variety  of  gas
    and  coal purchase contracts held for purposes other than trading.   (See
    Note  16  for  further description of these commitments.) No  derivatives
    were  used  as  of  December 31, 2000 and 1999 to hedge the  exposure  of
    these contracts to fluctuations in prices.

       Trading Activities

       In  late  1999,  TXU Europe Energy Trading began offering  price  risk
     management  services  to customers through a variety  of  financial  and
     other  instruments.  Substantially all of the activities in  continental
     Europe (including the Nordic region) are for trading purposes with  some
     additional  trading  activities occurring in the  UK.   The  continental
     European trading portfolio consists of the sum of forward contracts (for
     both  power and gas), physical options and swap agreements.   Power  and
     gas  forward  contracts  allow  TXU Europe  to  buy/sell  contracts  for
     physical power relating to a future time period.  During the year  2000,
     TXU  Europe  also actively traded call / put options on  physical  power
     relating  to a future time period (in the same period only one financial
     option  on  the  German market was traded). Non-physical trades  include
     financial swaps in which TXU Europe trades with counterparties against a
     published index price (e.g. Amsterdam Power Exchange - APX).  UK trading
     activities consist of limited trading of electricity forward agreements,
     contracts for differences and other contractual arrangements.  Contracts
     entered into for trading purposes are recorded on a mark-to-market basis
     with gains and losses recognized in earnings in the period in which such
     valuation changes occur.

       Electricity - During 2000 and 1999 there were net gains of  pounds  50
     million  and  pounds 23 million, respectively, recognized  from  trading
     electricity  commodity contracts or other derivatives.  At December  31,
     2000,  the  outstanding  notional quantity of all electricity  commodity
     instruments  under  contracts held for trading purposes  (net  buys  and
     sells)  was  29TWh for the period until 2005.  The fair  value  of  such
     instruments  at  December 31, 2000 and 1999 was pounds  37  million  and
     pounds 10 million, respectively, and the average fair value for 2000 was
     pounds 25 million and for 1999 was pounds 12 million.

       Gas  -  During  2000, net gains of pounds 47 million  were  recognized
     from trading gas commodity contracts or other derivatives in the UK  and
     mainland  Europe, mainly the result of higher gas prices, compared  with
     net  gains  of pounds 0.1 million for 1999.  At December 31,  2000,  the
     outstanding notional contract quantity of gas commodity instruments held
     for  trading purposes (net buys and sells) was 1,589 million Therms (0.2
     Bcf) for periods to 2006. The fair value of such instruments at December
     31,  2000  and  1999  was  pounds  16  million  and  pounds  5  million,
     respectively, and the average fair value for 2000 was pounds  5  million
     and for 1999 was pounds 2 million.

       Coal  -  In  the coal business, TXU Europe enters into contracts  for
     the  purchase  and  sale  of  coal  primarily  to  assure  supplies  for
     generation  purposes  but  also to engage in  trading  activities.   The
     overall net exposure of TXU Europe to the coal spot market is managed by
     using coal options and swaps. During 2000, net gains of pounds 3 million
     were   recognized  from  trading  coal  commodity  contracts  or   other
     derivatives.  At December 31, 2000, the outstanding notional quantity of
     commodity instruments under contracts held for trading purposes was  3.4
     million  tons  of  coal  for periods to 2002. The  fair  value  of  such
     instruments  at December 31, 2000 was pounds 2 million, and the  average
     fair  value for the year ended December 31, 2000 was less than pounds  1
     million.


                                A-52

<PAGE>
       The  following table displays the mark-to-market values of the  energy
     trading risk management assets and liabilities:

<TABLE>
<CAPTION>


                                     December 31, 2000
                                ----------------------------
                                 Assets   Liabilities   Net
                                -------- -------------  ----
                                      pounds  millions
     <S>                          <C>        <C>        <C>
     Fair Value:
     Current                       609        554        55
                                 =====      =====
     Less reserves                                        1
                                                      -----
       Net of reserves                                   54
                                                      =====
     Average  Value  for Year      295        266        29
                                 =====      =====     =====
</TABLE>

       The  fair  value of open positions is included in Energy Trading  Risk
     Management  Assets and Liabilities on the balance sheet.  Gross  revenue
     and  expenses  from  physically  settled transactions  are  included  in
     revenues  and  operating  expenses, respectively.   Financially  settled
     transactions along with unrealized gains and losses from changes in  the
     fair  value  of  the open positions are included in revenues  on  a  net
     basis.

     OTHER NON-TRADING ACTIVITIES

       Interest  rate risk management - Interest rate swaps and forward  rate
     agreements are entered into only for non-trading purposes and  are  used
     by  TXU Europe to manage exposures to the market risk inherent in  fixed
     rate  debt  securities and the cash flow risk inherent in variable  rate
     securities.  Gains and losses from interest rate swaps are accrued  over
     the contract period.

       At  December  31, 2000 and 1999, TXU Europe had various interest  rate
     and currency swaps in effect with an aggregate notional amount of US$1.5
     billion  (pounds 921 million) that effectively convert  the  fixed  rate
     Senior  Notes  payable  in US dollars to a fixed rate  debt  payable  in
     pounds   sterling.   These swaps mature on the dates of  the  underlying
     notes,  and  have  a weighted average fixed pay rate  of  6.61%  plus  a
     margin.  TXU  Europe  also  had various other  interest  rate  swaps  as
     required  by the Sterling Credit Agreement and to hedge certain  of  its
     borrowings  from  a  variable to a fixed rate.  The  aggregate  notional
     amount  of these interest rate swaps was pounds 839 million at  December
     31,  2000 and pounds 800 million at December 31, 1999, maturing in  2001
     through 2008 with average fixed rates of 6.69% and 5.55% at December 31,
     2000 and 1999, respectively.

       At  December 31, 1999, there were approximately pounds 15  million  in
     forward rate agreements outstanding which matured in the first few  days
     of  January 2000.  There were no forward rate agreements outstanding  at
     December 31, 2000.

       Foreign  currency risk management - TXU Europe has exposure to foreign
     currency  movements and uses derivative financial instruments  that  are
     entered  into  only  for non-trading purposes to  manage  this  exposure
     (principally  on  US$  denominated  debt  and  investments  in  European
     countries).   The  instruments used are forward purchase  contracts  and
     swaps.   The policy with regard to any such exposures is to match assets
     owned in foreign countries with borrowings in that same currency.  Where
     there are firm commitments to purchase goods in a specific currency then
     forward  contracts, options or swaps are used to fix the exchange  rate.
     There  were  no  options  outstanding at  December  31,  1999.   Foreign
     currency  transaction losses were pounds 1.4 million for 2000  and  were
     pounds  8 million for 1999, and were less than pounds 1 million for  the
     period from formation through December 31, 1998 and for the period  from
     April 1, 1998 through May 18, 1998, respectively.

       TXU  Europe has entered into currency arrangements with respect to the
     principal and semi-annual interest payments on US$ 500 million of  bonds
     to  swap  from dollars to pounds  sterling. For the principal  payments,
     TXU  Europe entered into a forward foreign currency contract to  acquire
     US$200  million  and US$300 million in October 2017  and  October  2027,
     respectively,  for  approximately pounds 218  million.   The  difference
     between  the forward rate and the spot rate at inception of the contract
     (a  foreign currency gain of approximately pounds 92 million)  is  being
     amortized to income over the life of the contract. For interest payments

                                A-53

<PAGE>
     on  the US$200 million 7.425% notes due 2017 and the $300 million  7.55%
     notes due 2027, the contracts set the exchange rate between sterling and
     US$ at $1.605 and $1.625, respectively.

       As  mentioned above, TXU Europe has entered into currency  swaps  that
     fix the principal amount and interest payments on the US$1.5 billion  of
     Senior  Notes to be repaid in sterling (pounds 921million) at a weighted
     average exchange rate between sterling and US$ of $1.629.

       In  November  1999,  TXU  Europe entered into  a  gilt  lock  (foreign
     currency/interest rate) contract to hedge a notional  amount  of  pounds
     230  million  on  the  anticipated issuance of a  financing  issue.  The
     anticipated  transaction did not close before December  31,  1999.   The
     contract  was  ended  in  January  2000  and  the  resulting   gain   of
     approximately pounds 8 million was recognized to other - income in  2000
     as the financing issue failed to qualify for hedge accounting.

       Concentrations  of  credit risk - TXU Europe's  financial  instruments
     that  are exposed to concentrations of credit risk consist primarily  of
     cash equivalents, trade receivables and derivative contracts.

       TXU  Europe's  trade receivables result primarily  from  its  gas  and
     electricity  retail  operations  and  reflect  a  broad  customer   base
     including industrial, commercial and residential customers.

       Credit  risk  relates to the risk of loss that TXU Europe would  incur
     as  a  result  of non-performance by counterparties to their  respective
     derivative  instruments.   TXU  Europe maintains  credit  policies  with
     regard  to its counterparties that enable management to minimize overall
     credit risk.  TXU Europe generally does not obtain collateral to support
     the  agreements  but establishes credit limits, monitors  the  financial
     viability  of  counterparties and seeks guarantees when appropriate.  In
     the  event a counterparty's credit rating declines, TXU Europe may apply
     certain remedies, if considered necessary.  TXU Europe believes that  it
     has   established  adequate  reserves  in  regard   to   the   risk   of
     nonperformance  by counterparties.  The extent of this  exposure  varies
     with  the  prevailing interest and currency rates and was  not  material
     throughout the period.

       Approximately  42% and  38% by volume of TXU Europe's  contracts  for
     differences (CfDs) and electricity forward agreements (EFAs)  traded  in
     the  periods  ended  December  31, 2000  and  1999,  respectively,  were
     contracted  with two primary counterparties.  The risk of  loss  to  TXU
     Europe   arising   from  non-performance  by  these  counterparties   is
     considered unlikely.


                                A-54

<PAGE>

       Fair  value  of  financial  instruments -  The  carrying  amounts  and
     related  estimated  fair  values of TXU Europe's  significant  financial
     instruments were as follows:

<TABLE>
<CAPTION>


                                                               December  31,
                                                  ---------------------------------------
                                                       2000                   1999
                                                  -----------------    ------------------
                                                  Carrying     Fair       Carrying   Fair
                                                   Amount     Value        Amount    Value
                                                          (p ounds  million)
 <S>                                                 <C>      <C>            <C>      <C>
 On balance sheet assets
   (liabilities):
   Assets
     Restricted cash                                  672      672            740      740
     Other investments                                695      695            520      520
     CfDs, EFAs and other energy contracts             37       37              -       10
       - trading  - net
     Gas commodity contracts - net                     16       16              -        5
     Coal trading contracts -  net                      2        2              -        -


   Liabilities
     Notes payable - banks (current)                 (525)    (525)          (251)    (251)
     Short term loans on accounts receivable           (5)      (5)          (177)    (177)
     Total long-term debt,  excluding
       capital leases                              (4,597)  (4,602)        (3,995)  (4,026)
     CfDs, EFAs and other energy
       contracts - non-trading                       (501)    (589)             -       76

     Off balance sheets assets (liabilities):
       Interest rate swaps                              -      (64)             -      (51)
       Foreign currency exchange contracts              -      101              -      (23)
       Financial guarantees and letters
          of credit                                     -     (655)             -     (271)
      Call options on Resettable                        -       31              -       -

</TABLE>

       The  carrying  amounts for financial assets and financial  liabilities
     classified  as  current assets and current liabilities approximate  fair
     value due to the short maturity of such instruments.

       The  following  methods  and assumptions were used  to  determine  the
     above fair values:

     (i)  The  fair  value of other investments is estimated based on  quoted
          market prices where available and other estimates.

     (ii) The  carrying amounts of restricted cash, notes payable - banks and
          short  term  loans  on accounts receivable approximate  their  fair
          values because of the short maturity of these instruments.

     (iii) The fair value of long term debt varies with market conditions
          and  is  estimated  based on current rates  for  similar  financial
          instruments offered to TXU Europe.

     (iv) The  fair  value  of  the  interest rate  swaps  is  based  on  the
          cancellation value of each swap agreement independently  calculated
          by  reference to the forward sterling interest rate curve  for  the
          unexpired portion of the swap.

     (v)  The fair value of foreign currency exchange contracts is based upon
          valuations provided by the counterparty.

     (vi) The  fair value of the gas commodity contracts is based on the  net
          present  value  of discounted future cash flows in accordance  with
          underlying gas forward curves.


                                A-55

<PAGE>

     (vii) The fair value of CfDs, EFAs and other energy contracts
          is based upon a discounted cash flow analysis using an estimate
          of forward energy prices.

     (viii) The fair value of financial guarantees and letters of credit has
          been determined using their full notional amount.

16.  COMMITMENTS

       Gas  take-or-pay contracts - TXU Europe is party to various  types  of
    contracts  for  the  purchase of gas. Almost  all  include  "take-or-pay"
    obligations  under which the buyer agrees to pay for a  minimum  quantity
    of  gas  in  a year.  To offset some of the exposures within its  overall
    natural  gas  portfolio,  which also includes a range  of  wholesale  and
    retail  customers, including TXU Europe Group's own power  stations,  TXU
    Europe  Group  has  entered into a variety of longer  term  gas  purchase
    contracts.   At  December  31,  2000,  the  commitments  under  long-term
    purchase  contracts amounted to an estimated pounds 633 million, covering
    periods  up  to  8  years.  Management does not  consider
    it   likely,  on  the  basis  of  current  expectations  of  demand  from
    customers, that any material payments will become due for gas not taken.

       Coal  contracts - TXU Europe has two coal purchase agreements  with  a
     supplier.   The first agreement is for 21 million tons in total  through
     2003.  The second agreement is also for 21 million tons in total between
     2003  and  2009.   Total committed purchases under these contracts  were
     approximately pounds 1.4 billion at December 31, 2000.

       Capacity  payments  and  guarantee - TXU  Europe  Energy  Trading  has
     several contracts requiring the payment of annual capacity fees.   Under
     the  terms  of  these  contracts, TXU Europe  Energy  Trading  will  pay
     (subject  to contract terms) annual capacity fees of pounds 318  million
     in  2001, pounds 346 million in 2002, pounds 373 million in 2003, pounds
     389 million in 2004, pounds 389 million in 2005 and pounds 3,220 million
     thereafter.  In  addition, TXU Europe Group will provide  a  pounds  300
     million  guarantee (declining over time) representing approximately  one
     year's  capacity payment, with the counterparty providing a  pounds  170
     million guarantee.

       Rental  commitments  -  The  future minimum rental  commitments  under
     non-cancelable operating leases were as follows:

<TABLE>
<CAPTION>


                                          December 31
                                        (pounds million)
     <S>                                     <C>
     2001                                     33
     2002                                     36
     2003                                     31
     2004                                     29
     2005                                      1
     Thereafter                                3
                                            ----
     Total                                   133
                                            ====
</TABLE>

       The  operating lease commitments relate to coal-fired power  stations.
    Additional  output-related payments of approximately pounds  6  per  MWh,
    indexed  to inflation, were payable under the original lease, to PowerGen
    for  the  first  four  years  of operation by  TXU  Europe  Group.  As  a

                                A-56

<PAGE>
    condition  for the UK Secretary of State for Trade and Industry  allowing
    PowerGen  to  acquire East Midlands Electricity plc,  the  output-related
    elements  of  these lease arrangements were terminated 15  months  early.
    Therefore output-related payments to PowerGen ended on March 31, 2000.

       Rental  expense  for operating leases amounted to pounds  24  million,
     pounds  23  million  and  pounds  16  million  for  the  periods   ended
     December  31,  2000,  1999 and 1998, respectively.  Rental  expense  for
     operating  leases  on  the  power  stations  during  the  periods  ended
     December  31, 2000, 1999 and 1998 includes pounds 17 million, pounds  17
     million  and pounds 10 million, respectively, of minimum lease  payments
     and   pounds  6  million,  pounds  6  million  and  pounds  6   million,
     respectively, of variable lease payments.  For the period ended May  18,
     1998,  operating  lease rental expense was pounds 10 million,  including
     pounds  6  million  of minimum lease payments and pounds  4  million  of
     variable payments.

       Other  - TXU Europe Group received government consent to build  a  215
     megawatt  (MW)  combined  heat and power plant  for  which  there  is  a
     commitment  of  pounds  23 million, most of which  falls  due  in  2001.
     Estimated  capital  expenditure on environmental control  facilities  is
     pounds  54  million  in 2001, pounds 36 million in  2002  and  pounds  9
     million in 2003.

17.  CONTINGENCIES

       TXU Europe is subject to business risks that are actively managed to
    limit exposures.

       Legal   proceedings  -  In  February  1997,  the  official  government
    representative   of  pensioners  (Pensions  Ombudsman)   made   a   final
    determination against the National Grid Company plc (National  Grid)  and
    its  group  trustees  with respect to complaints  by  two  pensioners  in
    National Grid's section of the Electricity Supply Pension Scheme  (ESPS).
    The  determination  related  to  the use  of  the  pension  fund  surplus
    resulting  from  the March 31, 1992 actuarial valuation of  the  National
    Grid  section to meet certain costs arising from the payment of  pensions
    on   early   retirement   upon  reorganization   or   downsizing.    This
    determination was set aside by the High Court on June 10, 1997,  and  the
    arrangements  made  by National Grid and its group  trustees  in  dealing
    with  the  surplus  were  confirmed. The  two  pensioners  appealed  this
    decision  to the Court of Appeal, and judgment was received. The judgment
    endorsed the Pensions Ombudsman's determination that the corporation  was
    not  entitled  to  unilaterally  deal with  any  surplus.  National  Grid
    appealed  the decision to the House of Lords.  The appeal has been  heard
    and  judgement  is  expected to be handed down in the second  quarter  of
    2001.   If  a similar complaint were to be made against TXU Europe  Group
    in  relation to its use of actuarial surplus in its section of the  ESPS,
    it  would  vigorously defend the action, ultimately through  the  courts.
    However,  if  a  determination were finally to be  made  against  it  and
    upheld  by  the courts, TXU Europe Group could have a potential liability
    to  repay  to its section of the ESPS an amount estimated by  TXU  Europe
    Group  to  be  up  to  pounds  45 million, exclusive  of  any  applicable
    interest charges.

       TXU  Europe  Group's section of the Electricity Supply Pension  Scheme
    remains  in  substantial surplus and any payment to the plan  that  might
    ultimately  prove to be necessary would be accounted for as  an  increase
    in  pension  assets, and would not have an immediate  impact  on  income.
    However,  any  related penalties or interest (which  could  be  assessed,
    though  none  are  currently  proposed) would  adversely  affect  income.
    There can be no assurance as to the outcome of this matter.

       On  January  25,  1999,  the Hindustan Development  Corporation  (HDC)
    issued  arbitration proceedings in the Arbitral Tribunal in Delhi,  India
    against  TEG  (now Energy Holdings (No.3) Limited), claiming  damages  of
    pounds 255 million for breach of contract following the termination of  a
    Joint  Development  Agreement  dated  March  20,  1997  relating  to  the
    construction, development and operation of a lignite based thermal  power
    plant  at  Barsingsar, Rajasthan.  On November 21, 2000, the  Arbitrators
    issued  their  decision and dismissed HDC's claim in full,  and  TEG  was
    liable  only  for its own legal costs involved in the case, an  estimated
    pounds  1  million.   On  December 21, 2000,  HDC  filed  a  Request  for
    Clarification of the Arbitrators' decision (Request) under Section 33  of
    the  Arbitration and Conciliation Act, the purpose of which is to entitle
    a  party  to  arbitration to seek clarification of language used  in  the
    Arbitrators' decision.  TEG filed its response to the Request on  January
    15,  2001  asserting  that the Request was untimely  made  and  that  the
    language  used by the Arbitrators needed no clarification.    TXU  Europe
    believes  that  the Arbitrators will have no alternative but  to  dismiss
    the  Request.   The effect of filing the Request, however,  has  been  to
    stay the time HDC has to file an appeal of the Arbitrators' decision.

                                A-57

<PAGE>

         In August 2000, the Spanish Stock Market Commission announced it was
    opening  an  investigation as to whether TXU Europe and Electrabel  acted
    in  concert  over share purchases of Hidrocantabrico in  order  to  avoid
    making a formal takeover bid.  TXU Corp. was originally named as a  party
    but  is  seeking its removal from these proceedings. If the two utilities
    are  found to be in violation of Spanish securities law, they could  face
    a  substantial fine and other restrictions.  The investigation could last
    until  February  2002.   TXU Europe is unable to  determine  what  impact
    there  may be, if any, as a result of the investigation.  TXU Europe  and
    TXU  Corp. believe there has been no violation of Spanish securities laws
    and are fully cooperating with the investigation.

       General  -  In  addition to the above, TXU Europe and its subsidiaries
     are  involved  in  various  other legal and  administrative  proceedings
     arising  in  the  ordinary course of its business.  TXU Europe  believes
     that  all  such  other lawsuits and resulting claims would  not  have  a
     material effect on its financial position, results of operations or cash
     flows.

       Financial  guarantees  -  On  May  19,  1998,  TEG  sold  its  US  and
     Australian  coal businesses and US energy marketing operations  (Peabody
     Sale)  prior  to its acquisition by TXU Corp. TEG has guaranteed  up  to
     US$110  million  (pounds 74 million) at December  31,  2000  of  certain
     liabilities that may be incurred and payable by the purchasers of  these
     businesses  and  operations with respect to the Peabody Holding  Company
     Retirement  Plan for Salaried Employees, the Powder River  Coal  Company
     Retirement  Plan and the Peabody Coal UMWA Retirement Plan,  subject  to
     certain specified conditions.

       TEG  entered  into various guarantees of obligations of affiliates  of
     its  former subsidiary Citizens Power LLC, arising under power  purchase
     agreements  and  note  purchase agreements in  connection  with  various
     Citizens  Power  energy  restructuring  projects,  as  well  as  various
     indemnity  agreements in connection with such projects.  TXU Europe  and
     TEG  continue to be either the guarantor or the indemnifying  party,  as
     the case may be, under these various agreements.

18.  SEGMENTS

       TXU  Europe has two major businesses, energy and networks,  which  are
     comprised of three reportable operating business segments.

       Each  segment  has  been  identified on the basis  of  the  underlying
     nature  of the business and its customer base and the different  product
     or  services offered.  The segments are managed separately because  each
     business  requires different strategies and the corresponding  necessary
     skill   sets,  e.g.,  engineering,  portfolio  management  and  customer
     services. The accounting policies of the segments are the same as  those
     described in the summary of significant accounting policies.

       The energy retail business segment provides electricity and gas to  UK
     residential, industrial and commercial customers.  It also has commenced
     retailing  joint ventures in continental Europe.  The portfolio  trading
     and  power  (formerly  the  energy management and  generation)  business
     segment  manages an integrated portfolio of contracts and  physical  gas
     and  generation  assets.   The contracts include  supplying  the  energy
     retail business with electricity and gas as well as contracts with third
     party  energy retailers, traders and wholesalers.  The networks business
     segment  owns and manages the electricity distribution system,  and  its
     principal   customer  base  is  energy  retail  and  other   electricity
     suppliers.   The  other  category consisted  of  two  other  businesses,
     metering and telecoms, which fell below the quantitative thresholds  for
     determining  reportable segments.  The metering  business  was  sold  in
     2000,  and the telecoms business was sold in 1998.  TXU Europe  accounts
     for  intersegment sales and transfers as if the sales or transfers  were
     to third parties, that is, at current market prices.

       Beginning  in  2000,  as  reflected in the tables  below,  the  income
    contribution for each segment includes operating and other  income  on  a
    US  GAAP basis, before interest, income taxes, distributions and minority
    interests, and after deducting a notional charge for the cost of  capital
    (income  before  interest).   Amounts for the  prior  periods  have  been
    reclassified to conform to the new presentation.


                                A-58

<PAGE>

       Capital/investment  expenditures includes all  items  of  capital  and
     investment  expenditures  including  European  equity  investments,  but
     excludes  proceeds on the sale of investments.  The cost of  capital  is
     calculated  as  0.5% per month on working capital and is  eliminated  on
     consolidation.    Overhead  costs,  such  as  those  incurred   by   the
     headquarters  office  and core costs related to information  technology,
     and  goodwill amortization are not allocated among the segments but  are
     reflected in unallocated corporate costs.

<TABLE>
<CAPTION>


                                  Portfolio
                                  Trading                              Intersegment
                         Energy     And    Total               All  Eliminations/
                         Retail    Power   Energy  Networks   Other  Reconciliation   Consolidate
                        --------  -------  ------- --------- ------- --------------   -----------
                                                         (pounds      million)
     <S>                 <C>      <C>       <C>       <C>      <C>      <C>            <C>
     Trade
     Revenues
            2000         2,155    2,349     4,504     371       17       (221)          4,671
            1999         2,219    1,425     3,644     429       18       (338)          3,753
          Dec-98         1,346      746     2,092     253       31       (211)          2,165
          May-98           262      145       407      53        6        (41)            425


     Contribution (a)
            2000            78      263       341     150       56        (30)(b)         517
            1999           (25)     409       384     175        4        (12)(c)         551
          Dec-98           (15)     218       203     100       48          9(d)          360
          May-98            (5)     (13)      (18)     21       (2)       (11)(e)         (10)

     Capital/Investment
       /Investment
       Expenditures
            2000             8      129       137     110        1        218             466
            1999            10      423       433     114        3        117             667
          Dec-98            21       61        82      82       17        214             395
          May-98             6        6        12      31       35          -              78


</TABLE>


    Periods covered:
    2000 = Year ended December 31, 2000
    1999 = Year ended December 31, 1999
    Dec-98 = Period from formation through December 31, 1998
    May-98= Period from April 1, 1998 through May 18, 1998

   (a)The following is a reconciliation of contribution to amounts reflected
       in the income statement:
<TABLE>
<CAPTION>



                                                            Period from
                                           Year Ended        Formation       Period From
                                            December 31,      Through       April 1, 1998
                                        -----------------    December 31,      Through
                                          2000      1999        1998         May 18, 1998
                                        -------    ------   -------------  --------------
                                                  (pounds  million)

     <S>                                  <C>       <C>         <C>
     Total Contribution by segments        547       563         351              1
                                         -----     -----       -----           -----

     Cost of capital elimination           146       141          86             17
     Unallocated corporate costs          (176)     (153)        (77)           (28)
                                         -----     -----       -----           -----
     Total reconciling items               (30)(b)   (12)(c)      9(d)          (11)(e)
                                         -----     -----       -----           -----
     Income before interest,
       income taxes and
       minority interest                   517       551         360            (10)
                                         =====     =====       =====           ======

</TABLE>

                                A-59

<PAGE>
       Other  information required to be disclosed by SFAS  No.  131  is  not
     presented because it is not readily available for presentation, and  TXU
     Europe would incur excessive costs to develop such information.

       The  accounting  policies  for the segments  are  the  same  as  those
     described in the summary of significant accounting policies.

       Revenues  are attributed to countries based on location of  customers.
     There  are no revenues for transactions with a single external  customer
     that  are  10%  or  more  of  TXU Europe's revenue.   The  Pool  is  not
     considered  by TXU Europe to be an external customer, as all electricity
     generated is sold into the Pool and is subsequently repurchased from the
     Pool for resale.

<TABLE>
<CAPTION>




                                                            Period from
                                           Year Ended        Formation       Period From
                                            December 31,      Through       April 1, 1998
                                        -----------------    December 31,      Through
                                          2000      1999        1998         May 18, 1998
                                        -------    ------   -------------  --------------
                                                  (pounds  million)
     <S>                                      <C>       <C>          <C>             <C>
     Revenues
       UK                                4,377     3,691        2,150           422
       Other countries                     294        62           15             3
                                        ------    ------       ------        ------
     Total                               4,671     3,753        2,165           425
                                        ======    ======       ======        ======
</TABLE>

<TABLE>
<CAPTION>
                                      December 31,
                                 ----------------------
                                   2000          1999
                                 --------      --------
                                    (pounds  million)
     <S>                          <C>            <C>
     Long- lived assets:
     --------------------
     United  Kingdom              2,717          2,656
     Other countried                 64             62
                                 ------         ------
       Total                      2,781          2,718
                                 ======         ======
</TABLE>


19.  QUARTERLY FINANCIAL INFORMATION - (UNAUDITED)

       In  the opinion of TXU Europe, for the information below includes  all
    adjustments (constituting only normal recurring accruals) necessary to  a
    fair statement of such amounts.
<TABLE>
<CAPTION>


                                                       Consolidated
                         Operating      Operating      Net   Income
                          Revenues        Income          (Loss)
                       -------------- --------------  --------------
     Quarter Ended      2000    1999   2000    1999    2000    1999
                       ------  ------  -----  ------  ------  ------
                                      (pounds  million)
     <S>                <C>     <C>     <C>      <C>     <C>    <C>
     March 31           1,151   1,173    151     168      46     57
     June 30              821     813     86     120      32     19
     September 30       1,013     700     61      66      (2)    (5)
     December 31        1,686   1,067    145     189      44     67
                       ------  ------  -----   -----   -----  -----
                        4,671   3,753    443     543     120    138
                       ======  ======  =====   =====   =====  =====

</TABLE>

                                A-60

<PAGE>
    Reconciliation to previously reported amounts -
<TABLE>
<CAPTION>

                                                        Quarter Ended
                                                       ---------------
                                                         March   June
                                                          31      30
                                                         2000    2000
                                                        ------  -----
                                                        pound millions
     <S>                                                 <C>     <C>
     Operating Income
     As reported                                          146     81
     Impact of:
       Change in depreciation                               5      5
                                                        -----   ----
     As restated                                          151     86
                                                        =====   ====
     Net Income:
     As reported                                           33     26
     Impact of:
       Cumulative effect of change in  depreciation         7      -
         method (net of tax)
       Change in depreciation                               4      4
       Change in minority interest                          2      2
                                                         ----   ----
     As restated                                           46     32
                                                         ====   ====

</TABLE>
       In  the  quarter  ended September 30, 2000, TXU Europe  implemented  a
    change  in the depreciation method for its distribution system assets  as
    of  December  31, 1999.  (See Note 3.) Results for the previous  quarters
    of  2000  were  restated to reflect the increase in net income  resulting
    from  the  adoption  of the new accounting method -  pounds  1.3  million
    after-tax  increase for the three months ended March 31, 2000 and  pounds
    1.3 million after-tax increase for the three months ended June 30, 2000.

       Also  in the quarter ended September 30, 2000, TXU Europe revised  the
    estimated  useful economic lives of its distribution system  assets.  The
    effect  of  the  change in estimate is not significant  for  the  quarter
    ended  September  30, 2000 and is not expected to be  significant  on  an
    annual basis.

       Minority   interest  -  In  the  third  quarter   2000,   TXU   Europe
    recalculated the minority interest in TXU Finance (No.2) Limited held  by
    another  subsidiary of TXU Corp.   Results for the previous  quarters  of
    2000  were restated to reflect the increase in net income resulting  from
    the  revisions in the minority interest calculations - pounds  2  million
    increase in each of the quarters ended March 31, 2000 and June 30,  2000,
    respectively.


20.  MISCELLANEOUS

       Restructuring  costs - During 2000, TXU Europe recorded  restructuring
     charges  and  other  costs of approximately pounds  79  million  pre-tax
     (pounds  55 million after-tax).  Of this amount, pounds 72 million  pre-
     tax  (pounds  50 million after-tax) of restructuring costs were  charged
     to  operation and maintenance expense and the remainder was  charged  to
     depreciation expense.

       The  restructuring costs were primarily a result of  the  creation  of
     the  24seven  joint venture and for certain other staff reorganizations.
     As  of  December  31,  2000, TXU Europe had recorded pre-tax  redundancy
     costs   of  approximately  pounds  35  million  related  to  termination
     benefits  for  958  employees  that  have  accepted  the  benefits.   In
     addition,  other pre-tax restructuring charges consisted  of  pounds  16
     million of asset writedowns and  pounds 28 million of other exit  costs.
     Further  restructuring charges are expected to be incurred  through  the
     end  of 2001.  As of December 31, 2000,  pounds 32 million of redundancy
     costs and pounds 11 million of other exit costs charged during the  year
     then  ended  have  been paid. Separate redundancy costs associated  with
     the  termination  benefits of employees of the recently acquired  Norweb
     Energi  were  included as liabilities assumed in the  acquisition.  (See
     Note 1.)

                                A-61

<PAGE>
       Other  income  -  net  -  Consists of the following  for  the  periods
     indicated:

<TABLE>
<CAPTION>



                                                            Period from
                                           Year Ended        Formation       Period From
                                            December 31,      Through       April 1, 1998
                                        -----------------    December 31,      Through
                                          2000      1999        1998         May 18, 1998
                                        -------    ------   -------------  --------------
                                                  (pounds  million)


   <S>                                     <C>       <C>         <C>           <C>
   Dividends from cost investments           3        9            5            -
   Gain on sale of investments              36        -            -            -
   Gain on the sale of business             29        -           13            -
   Foreign currency transaction
     gain (loss)                             1       (8)           -            -
   Dividends from marketable
     securities                              6        2           26            -
   Equity in earnings of unconsolidated
     subsidiaries and joint ventures         6        -            -            -
   Hidrocantabrico offer costs              (7)       -            -            -
   Other                                     -        5            -            1
   Undistributed equity in
     earnings of TEG                         -        -            2            -
                                         -----    -----        -----        -----
       Total                                74        8           46            1
                                         =====    =====        =====        =====


</TABLE>
       Accounts   receivable  -  At  December  31,  2000  and  1999  accounts
    receivable  are  stated  net  of uncollectible  accounts  of   pounds  31
    million   and   pounds  21  million,  respectively.   A   provision   for
    uncollectible  accounts  of  pounds 21 million,  pounds  17  million  and
    pounds  11 million was recorded during the years ended December 31,  2000
    and  1999  and for the period from formation through December  31,  1998,
    respectively.  An additional pounds 8 million was added in 2000  relating
    to  accounts  receivable purchased in connection with the acquisition  of
    Norweb  Energi.   TXU  Europe  did not realize  any  material  recoveries
    during  those  periods.   TXU  Europe wrote off  accounts  receivable  of
    pounds  19  million,  pounds 18 million and pounds 3 million  during  the
    years  ended December 31, 2000 and 1999 and for the period from formation
    through  December 31, 1998, respectively.  For the period from  April  1,
    1998  through  May  18,  1998,  TXU  Europe  recorded  a  provision   for
    uncollectible accounts of pounds 2 million, did not realize any  material
    recoveries and wrote off accounts receivable of pounds 1 million.


       Inventories -

<TABLE>
<CAPTION>


                                             December 31,
                                          -------------------
                                           2000         1999
                                          ------       ------
                                            pounds  millions
<S>                                         <C>          <C>
Inventories - at average cost:
  Materials and supplies                     24           32
  Fuel stock                                 48           90
                                          -----        -----
                                             72          122
                                          =====        =====
</TABLE>

       Goodwill - Goodwill is stated net of accumulated
    amortization of pounds 240 million in 2000 and pounds 138
    million in 1999.

                                A-62

<PAGE>

       Property, Plant and Equipment - consisted of:

<TABLE>
<CAPTION>


                                                 December 31,
                                            --------------------
                                             2000          1999
                                            ------        ------
                                               (pounds  million)
     <S>                                     <C>           <C>
     Electricity distribution system         1,341         1,227
     Electricity generating stations:
          Owned                                519           409
          Under capital lease                  775           775
     Upstream gas assets (sold in
       February 2001)                          144           145
     Other land and buildings                  104           105
     Plant and equipment                       296           319
     Accumulated depreciation                 (398)         (262)
                                            ------        ------
     Net property, plant and equipment       2,781         2,718
                                            ======        ======
</TABLE>

       The  net  book value of electricity generating stations under  capital
     lease was pounds 659 million and pounds 697 million at December 31, 2000
     and 1999, respectively.

       Capitalized  software costs totaling pounds 25 million and  pounds  24
     million as of December 31, 2000 and 1999, respectively, are included  in
     plant and equipment.  Amortization expense relating to software costs of
     pounds  4  million and pounds 2 million has been recorded  in  2000  and
     1999, respectively.  No amortization expense was recorded in the periods
     prior  to  December 31, 1998. An additional pounds 4 million of software
     costs  associated with businesses that had been sold was written off  in
     2000.

       Letters  of  credit - At December 31, 2000 and 1999,  TXU  Europe  had
     outstanding  letters  of  credit of pounds  281  million  and  pounds  3
     million,  respectively. The letters of credit at December 31,  2000  are
     primarily  to  cover the potential termination values  on  cross  border
     leases and to an option to provide future energy sales.

       Cash  flows  -  The following schedule details TXU Europe's  cash-flow
    impact on certain investing activities:
<TABLE>
<CAPTION>


                                                             Period from
                                            Year Ended        Formation       Period From
                                             December 31,      Through       April 1, 1998
                                         -----------------    December 31,      Through
                                           2000      1999        1998         May 18, 1998
                                         -------    ------   -------------  --------------
                                                   (pounds  million)


<S>                                       <C>       <C>          <C>             <C>
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for interest                     273      253          223              5
Cash paid for income taxes                  28       19          137              -

NON-CASH TRANSACTIONS
Acquisition of Norweb Energi and
  Other Businesses:
    Fair value of assets acquired          302        -            -              -
    Fair  value  of  liabilities
      assumed                             (605)       -            -              -
    Goodwill                               622        -            -              -
                                        -------
        Net cash used                      319        -            -              -
                                        =======

Investment received in
  consideration for sale                    -         -           22              -
Consolidation of debt and related                                170
  investment on cross-border leases         -         -                           -
Issuance of loan notes upon
  acquisition of TEG                        -         -           85              -
Advances from TXU Corp. upon
  acquisition of TEG                        -         -          882              -

</TABLE>


                                                   APPENDIX B

                     TXU EUROPE LIMITED
                 Exhibits to 2000 Form 10-K


        Previously
          Filed*
Exhibit With File     As
          Number    Exhibit

3(a)    333-82307    3(a)    -    Memorandum of Association of
         and 333-               TXU Eastern Funding Company.
         82307-1
3(b)    333-82307    3(b)    -    Articles of Association of
         and 333-               TXU Eastern Funding Company.
         82307-1
3(c)    333-82307    3(c)    -    Memorandum of Association of
         and 333-               TXU Europe Limited.
         82307-1
3(d)    333-82307    3(d)    -    New Articles of Association
         and 333-               of TXU Europe Limited.
         82307-1
4(a)    333-82307    4(a)    -    Indenture (For Unsecured
         and 333-               Debt Securities) dated May 1,
         82307-1                1999.
4(b)    333-82307    4(b)    -    Officer's Certificate
         and 333-               establishing 6.15% senior notes
         82307-1                due May 15, 2002 and 6.15%
                                exchange senior notes due May 15,
                                2002, with the forms of notes
                                attached thereto.
4(c)    333-82307    4(c)    -    Officer's Certificate
         and 333-               establishing 6.45% senior notes
         82307-1                due May 15, 2005 and 6.45%
                                exchange senior notes due May 15,
                                2005, with the forms of notes
                                attached thereto.
4(d)    333-82307    4(d)    -    Officer's Certificate
         and 333-               establishing 6.75% senior notes
         82307-1                due May 15, 2009 and 6.75%
                                exchange senior notes due May 15,
                                2009 with the forms of notes
                                attached thereto.
4(e)    333-82307    4(f)    -    Deposit Agreement with
         and 333-               respect to the senior notes and
         82307-1                the exchange senior notes.
4(f)     1-12833    4(rrr)   -    Amended and Restated Trust
        Form 10-K               Agreement, dated as of March 2,
          (1999)                2000, among TXU Business Services
                                Company, TXU Europe Limited, TXU
                                Europe CP, Inc., and The Bank of
                                New York, The Bank of New York
                                (Delaware), and the
                                Administrative Trustees of TXU
                                Europe Capital I.
4(g)     1-12833    4(sss)   -    Amended and Restated
        Form 10-K               Partnership Agreement of Limited
          (1999)                Partnership, dated as of March 2,
                                2000, of TXU Europe Funding I,
                                L.P.
4(h)     1-12833    4(ttt)   -    Preferred Trust Securities
        Form 10-K               Guarantee, dated as of March 2,
          (1999)                2000, between TXU Europe Limited
                                and The Bank of New York.
4(i)     1-12833    4(uuu)   -    Preferred Partnership
        Form 10-K               Securities Guarantee, dated as of
          (1999)                March 2, 2000, between TXU Europe
                                Limited and The Bank of New York.
4(j)     1-12833    4(vvv)   -    Indenture (for Unsecured
        Form 10-K               Subordinated Debt Securities),
          (1999)                dated as of March 2, 2000, among
                                Funding, TXU Europe Limited and
                                The Bank of New York.
4(k)     1-12833    4(www)   -    Officer's certificate, dated
        Form 10-K               as of March 2, 2000, establishing
          (1999)                the terms of the 9 3/4% Junior
                                Subordinated Deferrable Interest
                                Debentures, Series A, due March
                                2, 2020, of Funding.
4(l)     1-12833    4(xxx)   -    Deposit Agreement, dated as
        Form 10-K               of March 2, 2000, between The
          (1999)                Bank of New York and Funding.
4(m)     1-12833    4(yyy)   -    Indenture (for Unsecured
        Form 10-K               Subordinated Debt Securities)
          (1999)                dated as of March 2, 2000, among
                                TXU Europe Group, TXU Europe
                                Limited and The Bank of New York.
4(n)     1-12833    4(zzz)   -    Officer's Certificate, dated
        Form 10-K               as of March 2, 2000, establishing
          (1999)                the terms of the 9 3/4% Junior
                                Subordinated Deferrable Interest
                                Debentures, Series A, due March
                                2, 2020 of TXU Europe Group.
4(o)     1-12833     4(A)    -    Deposit Agreement, dated as
        Form 10-K               of March 2, 2020, between The
          (1999)                Bank of New York TXU Europe Group
                                plc.
4(p)     333-8008     4.1    -    Indenture, dated as of
           and                  October 16, 1997, among Energy
        333-8008-1              Group Overseas B.V. (EGO), The
                                Energy Group PLC and The Bank of
                                New York, as Trustee.
4(q)     333-8008     4.2    -    Form of 7.375% Series B
           and                  Guaranteed note of EGO due 2017.
        333-8008-1
4(r)     333-8008     4.3    -    Form of 7.500% Series B
           and                  Guaranteed note of EGO due 2027.
        333-8008-1
4(s)     1-12833     4(B)    -    Trust Deed relating to a
        Form 10-K               Euro 2,000,000,000 Euro Medium
          (1999)                Term Note Programme (EMTN
                                Program) between Funding, TXU
                                Europe Limited and the Law
                                Debenture Trust Corporation,
                                dated December 15, 1999.
4(t)     1-12833     4(C)    -    Pricing Supplement with
        Form 10-K               respect to pounds 225,000,000
          (1999)                7.25% Notes due 2030 issued
                                pursuant to the EMTN Program.

4(u)    001-15709    4(a)    -    Pricing Supplement with
        Form 10-Q               respect to pounds 100,000,000
         (Quarter               6.88% Notes due 2001 issued
          ended                 pursuant to the EMTN Program.
        September
        30, 2000)
4(v)    001-15709    4(b)    -    Pricing Supplement with
        Form 10-Q               respect to pounds 50,000,000
         (Quarter               7.25% Notes due 2030 issued
          ended                 pursuant to the EMTN Program.
        September
        30, 2000)
4(w)        -          -     -    Pricing Supplement, dated
                                November 27, 2000, with respect
                                to pounds 301,000,000 35 PUT 5
                                Resettable Securities due 2035
                                issued pursuant to the EMTN
                                Program.
4(x)        -          -     -    First Supplemental Trust
                                Deed, dated November 29, 2000,
                                with respect to pounds
                                301,000,000 35 PUT 5 Resettable
                                Securities due 2035 issued
                                pursuant to the EMTN Program.
4(y)        -          -     -    Remarketing Agreement, dated
                                November 29, 2000, relating to
                                the 35 PUT 5 Resettable
                                Securities due 2035 issued
                                pursuant to the EMTN Program.
10(a)    1-12833     10(a)   -    Facilities Agreement for
        Form 10-Q               pounds 1,275,000,000 Credit
         (Quarter               Facilities, dated March 24, 1999
          ended                 (Sterling Credit Agreement),
        March 31,               among TXU Europe Limited, TXU
          1999)                 Finance (No. 2) Limited, TXU
                                Acquisitions Limited, Chase
                                Manhattan Bank plc, Lehman
                                Brothers International (Europe),
                                Merrill Lynch Capital Corporation
                                and the other banks named
                                therein.
10(b)   001-15709    10(a)   -    Agreement dated August 23,
        Form 10-Q               2000, supplemental to the
         (Quarter               Sterling Credit Agreement
          ended
        September
        30, 2000)
10(c)   001-15709    10(b)   -    364-day Revolving Credit
        Form 10-Q               Agreement for pounds 300,000,000
         (Quarter               dated August 23, 2000, among TXU
          ended                 Europe Limited, Chase Manhattan
        September               plc, Chase Manhattan
        30, 2000)               International Limited and the
                                other banks named therein.
10(d)    1-12833     99(a)   -    Facility Agreement for
        Form 10-Q               pounds 250,000,000 Revolving
         (Quarter               Credit Facility, dated May 21,
          ended                 1998, among Eastern Electricity
        September               plc (EE), and Chase Manhattan
        30, 1998)               plc, Lehman Brothers
                                International and Merrill Lynch
                                Capital Corporation as Joint Lead
                                Arrangers, and The Chase
                                Manhattan Bank, Lehman Commercial
                                Paper Inc. and Merrill Lynch
                                Capital Corporation as
                                Underwriters.
10(e)    1-14576     3.10    -    Deed of Assignment of Rents,
        Form 20-F,              dated as of October 28, 1996,
          dated                 among EMPL (EMPL), Eastern Group
         January                Finance Limited, Barclays Bank
         27, 1997               PLC (as agent) and the banks
                                listed therein.
10(f)    1-14576     3.12    -    Guarantee and Indemnity
        Form 20-F,              Deed, dated as of October 28,
          dated                 1996, among Eastern Group,
         January                Eastern Generation Limited (EGL),
         27, 1997               EE, Barclays Bank PLC, Barclays
                                De Zoete Wedd Limited, and the
                                other banks listed therein.
10(g)   333-82307   10(f)-2  -    Amendment dated July 17,
         and 333-               1998 to the Guarantee and
         82307-1                Indemnity Deed, dated as of
                                October 28, 1996, among Eastern,
                                EGL, EE, Barclays Bank PLC,
                                Barclays De Zoete Wedd Limited,
                                and the other banks listed
                                therein.
10(h)   333-82307   10(f)-3  -    Amendment dated March 11,
         and 333-               1999 to the Guarantee and
         82307-1                Indemnity Deed dated as of
                                October 28, 1996 (as amended and
                                restated on July 17, 1998), among
                                Eastern Group, EGL, EE, Barclays
                                Bank PLC, Barclays De Zoete Wedd
                                Limited, and the other banks
                                listed therein.
10(I)    1-14576     3.11    -    Standby Credit Facility
        Form 20-F,              Agreement, dated as of October
          dated                 28, 1996, among EMPL and Eastern
         January                Merchant Generation Limited
         27, 1997               (EMGL) (as borrowers), Eastern
                                Group and EGL (as guarantors),
                                EE, The Industrial Bank of Japan,
                                Limited (as arranger and agent),
                                The Bank of Nova Scotia, the Dai-
                                ichi Kangyo Bank, Limited, The
                                Royal Bank of Scotland plc and
                                Societe Generale (as co-
                                arrangers), and the financial
                                institutions listed therein.
10(j)   333-82307   10(g)-1  -    Supplemental Agreement dated
         and 333-               July 17, 1998 to the Standby
         82307-1                Credit Facility dated October 28,
                                1996 among EMPL and EMGL (as
                                borrowers), Eastern and EGL (as
                                guarantors), EE, Barclays Capital
                                and The Royal Bank of Scotland
                                plc (as arrangers), The Bank of
                                Nova Scotia, Bayerische
                                Landesbank Girozentrale, The Dai-
                                Ichi Kangyo Bank, Limited, Den
                                Danske Bank Aktieselskab,
                                Nationsbank, N.A., Royal Bank of
                                Canada Europe Limited, The
                                Toronto-Dominion Bank and
                                Westdeutsche Landesbank
                                Girozentrale (as co-arrangers),
                                The Royal Bank of Scotland plc
                                (as agent), and the financial
                                institutions listed therein.
10(k)   333-82307   10(g)-2  -    Amendment dated March 11,
         and 333-               1999 to the Supplemental
         82307-1                Agreement dated July 17, 1998 to
                                the Standby Credit Facility dated
                                October 28, 1996 among EMPL and
                                EMGL (as borrowers), Eastern and
                                EGL (as guarantors), EE, Barclays
                                Capital and The Royal Bank of
                                Scotland plc (as arrangers), The
                                Bank of Nova Scotia, Bayerische
                                Landesbank Girozentrale, The Dai-
                                Ichi Kangyo Bank, Limited, Den
                                Danske Bank Aktieselskab,
                                Nationsbank, N.A., Royal Bank of
                                Canada Europe Limited, The
                                Toronto-Dominion Bank and
                                Westdeutsche Landesbank
                                Girozentrale (as co-arrangers),
                                The Royal Bank of Scotland plc
                                (as agent), and the financial
                                institutions listed therein.
10(l)   333-82307    10(h)   -    Pooling and Settlement
         and 333-               Agreement dated 30 March 1990, as
         82307-1                amended as of 15 April 1999,
                                among EE, National Grid Company
                                plc and other parties.
10(m)   333-82307    10(i)   -    Master Connection and Use of
         and 333-               System Agreement dated as of 30
         82307-1                March 1990 among the National
                                Grid Company plc and its users
                                (including EE).
10(n)   333-82307    10(j)   -    Lease of land and premises
         and 333-               known as West Burton, Ironbridge
         82307-1                and Rugeley B Power Stations
                                dated 27 June  1996 from National
                                Power PLC to EMPL and Eastern.
10(o)   333-82307    10(k)   -    Sublease of land and
         and 333-               premises known as West Burton,
         82307-1                Ironbridge and Rugeley B Power
                                Stations dated 27 June  1996 from
                                EMPL to EMGL and Eastern.
10(p)   333-82307    10(l)   -    Lease of commercial premises
         and 333-               at High Marnham, Newark,
         82307-1                Nottinghamshire dated 2 July 1996
                                between PowerGen plc and EMPL.
10(q)   333-82307    10(m)   -    Underlease of commercial
         and 333-               premises at High Marnham, Newark,
         82307-1                Nottinghamshire dated 2 July 1996
                                between EMPL and EMGL.
10(r)   333-82307    10(n)   -    Lease of commercial premises
         and 333-               at Drakelow, Burton-on-Trent,
         82307-1                Staffordshire dated 2 July 1996
                                between PowerGen plc and EMPL.
10(s)   333-82307    10(o)   -    Underlease of commercial
         and 333-               premises at Drakelow, Burton-on-
         82307-1                Trent, Staffordshire dated 2 July
                                1996 between EMPL and EMGL.
12(a)                        -    Computation of Ratio of
                                Earnings to Fixed Charges for TXU
                                Europe Limited for the years
                                ended December 31, 2000 and 1999,
                                and the period from formation
                                through December 31, 1998.
12(b)   333-82307    12(b)   -    Computation of Ratio of
         and 333-               Earnings to Fixed Charges for TXU
         82307-1                Europe Group plc and Subsidiaries
                                (formerly Eastern Group plc and
                                Subsidiaries) (US GAAP basis).
16      333-82307-    16     -    Letter re: change in
         1   Form               certifying accountant.
           10-K
          (1999)


          *    Incorporated herein by reference.
6902: