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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005



 OR 



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission File Number 1-12833



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TXU Corp.

(Exact Name of Registrant as Specified in its Charter)



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|                         |  |                                     
|------------------------ |  | ------------------------------------
|Texas                    |  | 75-2669310                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)



|                                                    |  |                                
|--------------------------------------------------- |  | -------------------------------
|1601 Bryan Street, Dallas TX, 75201-3411            |  | (214) 812-4600                 
|(Address of Principal Executive Offices) (Zip Code) |  | (Registrants Telephone Number)



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Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).    Yes  x    No ̈



Common Stock outstanding at May 5, 2005: 239,679,258 shares, without par
value.



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                       |  |   
|----------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | --
|                              |  | PAGE                                                                                                 
|GLOSSARY                      |  | ii                                                                                                   
|                              | 
|PART I.
FINANCIAL INFORMATION |  |                                                                                                      
|                              |  |                                                                                                      
|Item 1.                       |  | Financial Statements                                                                                  |  |   
|                              |  |                                                                                                      
|                              |  | Condensed Statements of Consolidated Income Three Months Ended March 31, 2005 and 2004               |  | 1 
|                              |  |                                                                                                      
|                              |  | Condensed Statements of Consolidated Comprehensive Income Three Months Ended March 31, 2005 and 2004 |  | 2 
|                              |  |                                                                                                      
|                              |  | Condensed Statements of Consolidated Cash Flows Three Months Ended March 31, 2005 and 2004           |  | 3 
|                              |  |                                                                                                      
|                              |  | Condensed Consolidated Balance Sheets March 31, 2005 and December 31, 2004                           |  | 4 
|                              |  |                                                                                                      
|                              |  | Notes to Condensed Consolidated Financial Statements                                                  |  | 5 
|                              |  |                                                                                                      
|                              |  | Report of Independent Registered Public Accounting Firm                                               |  | 27
|                              |  |                                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 28
|                              |  |                                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                            |  | 50
|                              |  |                                                                                                      
|Item 4.                       |  | Controls and Procedures                                                                               |  | 62
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                      
|                              |  |                                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                                     |  | 63
|                              |  |                                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                           |  | 63
|                              |  |                                                                                                      
|Item 6.                       |  | Exhibits                                                                                              |  | 64
|                              | 
|SIGNATURE                     |  | 65                                                                                                   



Periodic reports on Form 10-K and
Form 10-Q and current reports on Form 8-K that contain financial information of TXU Corp. are made available to the public, free of charge, on the TXU Corp. website at http://www.txucorp.com, shortly after they have been filed with the Securities
and Exchange Commission. TXU Corp. will provide copies of current reports not posted on the website upon request. The information on TXU Corp.s website shall not be deemed a part of, or incorporated by reference into, this report on Form 10-Q.



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##### Table of Contents

GLOSSARY



When the following terms and
abbreviations appear in the text of this report, they have the meanings indicated below.



|                               |  |                                                                                                                                                                
|------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|                               | 
|1999 Restructuring Legislation |  | legislation that restructured the electric utility industry in Texas to provide for retail competition                                                         
|                               | 
|2004 Form 10-K                 |  | TXU Corp.s Annual Report on Form 10-K for the year ended December 31, 2004                                                                                    
|                               | 
|Bcf                            |  | billion cubic feet                                                                                                                                             
|                               | 
|Capgemini                      |  | Capgemini Energy LP, a subsidiary of Cap Gemini North America Inc. that provides business support services to TXU Corp.                                        
|                               | 
|Commission                     |  | Public Utility Commission of Texas                                                                                                                             
|                               | 
|EITF                           |  | Emerging Issues Task Force                                                                                                                                     
|                               | 
|EITF 04-6                      |  | EITF Issue No. 04-6, Accounting for Stripping Costs Incurred during Production in the Mining Industry                                                        
|                               | 
|ERCOT                          |  | Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas
|                               | 
|ERISA                          |  | Employee Retirement Income Security Act                                                                                                                        
|                               | 
|FASB                           |  | Financial Accounting Standards Board, the designated organization in the private sector for establishing standards for financial accounting and reporting      
|                               | 
|FERC                           |  | Federal Energy Regulatory Commission                                                                                                                           
|                               | 
|FIN                            |  | Financial Accounting Standards Board Interpretation                                                                                                            
|                               | 
|FIN 47                         |  | FIN No. 47, Accounting for Conditional Asset Retirement Obligations  An Interpretation of FASB Statement No. 143                                            
|                               | 
|Fitch                          |  | Fitch Ratings, Ltd.                                                                                                                                            
|                               | 
|GW                             |  | gigawatts                                                                                                                                                      
|                               | 
|GWh                            |  | gigawatt-hours                                                                                                                                                 
|                               | 
|historical service territory   |  | the territory, largely in north Texas, being served by TXU Corp. as a regulated utility at the time of entering retail competition on January 1, 2002          
|                               | 
|IRS                            |  | Internal Revenue Service                                                                                                                                       
|                               | 
|kV                             |  | kilovolts                                                                                                                                                      
|                               | 
|kWh                            |  | kilowatt-hours                                                                                                                                                 
|                               | 
|Moodys                        |  | Moodys Investors Services, Inc.                                                                                                                               
|                               | 
|MW                             |  | megawatts                                                                                                                                                      
|                               | 
|MWh                            |  | megawatt-hours                                                                                                                                                 
|                               | 
|NRC                            |  | United States Nuclear Regulatory Commission                                                                                                                    



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|                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Pinnacle              |  | Pinnacle One Partners, L.P., formerly the holding company for the telecommunications business and formerly a joint venture                                                                                                                                                                                                                                                                                                                               
|                      | 
|price-to-beat rate    |  | residential and small business customer electricity rates established by the Commission that (i) were required to be charged in a REPs historical service territories until the earlier
of January 1, 2005 or the date when 40% of the electricity consumed by such customer classes is supplied by competing REPs, adjusted periodically for changes in fuel costs, and (ii) are required to be made available to those customers until January
1, 2007
|                      | 
|REP                   |  | retail electric provider                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                      | 
|S&P                   |  | Standard & Poors, a division of the McGraw Hill Companies                                                                                                                                                                                                                                                                                                                                                                                               
|                      | 
|Sarbanes-Oxley        |  | Sarbanes  Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                             
|                      | 
|SEC                   |  | United States Securities and Exchange Commission                                                                                                                                                                                                                                                                                                                                                                                                         
|                      | 
|SFAS                  |  | Statement of Financial Accounting Standards issued by the FASB                                                                                                                                                                                                                                                                                                                                                                                           
|                      | 
|SFAS 133              |  | SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                             
|                      | 
|SFAS 140              |  | SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement 125                                                                                                                                                                                                                                                                                                       
|                      | 
|SFAS 143              |  | SFAS No. 143, Accounting for Asset Retirement Obligations                                                                                                                                                                                                                                                                                                                                                                                              
|                      | 
|SG&A                  |  | selling, general and administrative                                                                                                                                                                                                                                                                                                                                                                                                                      
|                      | 
|TXU Australia         |  | refers to TXU Australia Group Pty Ltd, a former subsidiary of TXU Corp., and/or its consolidated subsidiaries, depending on context                                                                                                                                                                                                                                                                                                                      
|                      | 
|TXU Communications    |  | TXU Communications Ventures Company, a former subsidiary of Pinnacle                                                                                                                                                                                                                                                                                                                                                                                     
|                      | 
|TXU Corp.             |  | refers to TXU Corp., a holding company, and/or its consolidated subsidiaries, depending on context                                                                                                                                                                                                                                                                                                                                                       
|                      | 
|TXU Electric Delivery |  | refers to TXU Electric Delivery Company, a subsidiary of US Holdings, and/or its consolidated bankruptcy remote financing subsidiary, TXU Electric Delivery Transition Bond Company LLC,
depending on context                                                                                                                                                                                                                                            
|                      | 
|TXU Energy Holdings   |  | refers to TXU Energy Company LLC, a subsidiary of US Holdings, and/or its consolidated subsidiaries, depending on context                                                                                                                                                                                                                                                                                                                                
|                      | 
|TXU Europe            |  | TXU Europe Limited, a former subsidiary of TXU Corp.                                                                                                                                                                                                                                                                                                                                                                                                     
|                      | 
|TXU Fuel              |  | TXU Fuel Company, a former subsidiary of TXU Energy Holdings                                                                                                                                                                                                                                                                                                                                                                                             
|                      | 
|TXU Gas               |  | TXU Gas Company, a former subsidiary of TXU Corp.                                                                                                                                                                                                                                                                                                                                                                                                        
|                      | 
|TXU Mining            |  | TXU Mining Company LP, a subsidiary of TXU Energy Holdings                                                                                                                                                                                                                                                                                                                                                                                               



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|                         |  |                                                                                                               
|------------------------ |  | --------------------------------------------------------------------------------------------------------------
|TXU Portfolio Management |  | TXU Portfolio Management Company LP, a subsidiary of TXU Energy Holdings                                      
|                         | 
|UK                       |  | United Kingdom                                                                                                
|                         | 
|US                       |  | United States of America                                                                                      
|                         | 
|US GAAP                  |  | accounting principles generally accepted in the US                                                            
|                         | 
|US Holdings              |  | TXU US Holdings Company, a subsidiary of TXU Corp. and parent of TXU Energy Holdings and TXU Electric Delivery



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PART I. FINANCIAL INFORMATION



Item 1. FINANCIAL STATEMENTS



TXU CORP. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)



|                                                                        |  |                                                 |       |   |      |   |       |  
|----------------------------------------------------------------------- |  | ----------------------------------------------- | ----- | - | ---- | - | ----- | -
|                                                                        |  | Three Months Ended March 31,                    |      
|                                                                        |  | 2005                                            |       |   | 2004 |  
|                                                                        |  | (millions of dollars, except per share amounts) |      
|Operating revenues                                                      |  | $                                               | 2,040 |   |      | $ | 2,132 |  
|                                                                        |  |                                                
|Costs and expenses:                                                     |  |                                                 |       |   |      |   |       |  
|Cost of energy sold and delivery fees                                   |  |                                                 | 744   |   |      |   | 906   |  
|Operating costs                                                         |  |                                                 | 333   |   |      |   | 343   |  
|Depreciation and amortization                                           |  |                                                 | 187   |   |      |   | 190   |  
|Selling, general and administrative expenses                            |  |                                                 | 183   |   |      |   | 229   |  
|Franchise and revenue-based taxes                                       |  |                                                 | 85    |   |      |   | 85    |  
|Other income                                                            |  |                                                 | (51   | ) |      |   | (9    | )
|Other deductions                                                        |  |                                                 | 3     |   |      |   | 19    |  
|Interest income                                                         |  |                                                 | (19   | ) |      |   | (4    | )
|Interest expense and related charges                                    |  |                                                 | 195   |   |      |   | 184   |  
|                                                                        |  |                                                 |       |   |      |   |       |  
|Total costs and expenses                                                |  |                                                 | 1,660 |   |      |   | 1,943 |  
|                                                                        |  |                                                 |       |   |      |   |       |  
|Income from continuing operations before income taxes                   |  |                                                 | 380   |   |      |   | 189   |  
|                                                                        |  |                                                
|Income tax expense (benefit)                                            |  |                                                 | (26   | ) |      |   | 61    |  
|                                                                        |  |                                                 |       |   |      |   |       |  
|Income from continuing operations                                       |  |                                                 | 406   |   |      |   | 128   |  
|                                                                        |  |                                                
|Income from discontinued operations, net of tax effect (Note 2)         |  |                                                 | 15    |   |      |   | 50    |  
|                                                                        |  |                                                 |       |   |      |   |       |  
|Net income                                                              |  | $                                               | 421   |   |      | $ | 178   |  
|                                                                        |  |                                                
|Preference stock dividends                                              |  |                                                 | 5     |   |      |   | 5     |  
|                                                                        |  |                                                 |       |   |      |   |       |  
|Net income available to common shareholders                             |  | $                                               | 416   |   |      | $ | 173   |  
|                                                                        |  |                                                 |       |   |      |   |       |  
|Average shares of common stock outstanding (millions):                  |  |                                                 |       |   |      |   |       |  
|Basic                                                                   |  |                                                 | 238   |   |      |   | 323   |  
|Diluted                                                                 |  |                                                 | 238   |   |      |   | 380   |  
|                                                                        |  |                                                
|Per share of common stock:                                              |  |                                                 |       |   |      |   |       |  
|Basic earnings:                                                         |  |                                                 |       |   |      |   |       |  
|Income from continuing operations                                       |  | $                                               | 1.71  |   |      | $ | 0.40  |  
|Preference stock dividends                                              |  |                                                 | (0.02 | ) |      |   | (0.02 | )
|Net income from continuing operations available for common stock        |  |                                                 | 1.69  |   |      |   | 0.38  |  
|Income from discontinued operations, net of tax effect                  |  |                                                 | 0.06  |   |      |   | 0.15  |  
|Net income available for common stock                                   |  |                                                 | 1.75  |   |      |   | 0.53  |  
|                                                                        |  |                                                
|Diluted earnings (Note 1):                                              |  |                                                 |       |   |      |   |       |  
|Income (loss) from continuing operations                                |  |                                                 | (0.23 | ) |      |   | 0.37  |  
|Preference stock dividends                                              |  |                                                 | (0.02 | ) |      |   | (0.01 | )
|Net income (loss) from continuing operations available for common stock |  |                                                 | (0.25 | ) |      |   | 0.36  |  
|Income from discontinued operations, net of tax effect                  |  |                                                 | 0.06  |   |      |   | 0.13  |  
|Net income (loss) available for common stock                            |  |                                                 | (0.19 | ) |      |   | 0.49  |  
|                                                                        |  |                                                
|Dividends declared                                                      |  |                                                 | 0.563 |   |      |   | 0.125 |  



See Notes to Financial Statements.



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##### Table of Contents

TXU CORP. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)



|                                                                                       |  |                              |     |   |      |   |     |  
|-------------------------------------------------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                                                                       |  | Three Months Ended March 31, |    
|                                                                                       |  | 2005                         |     |   | 2004 |  
|                                                                                       |  | (millions of dollars)        |    
|Components related to continuing operations:                                           |  |                              |     |   |      |   |     |  
|                                                                                       |  |                             
|Income from continuing operations                                                      |  | $                            | 406 |   |      | $ | 128 |  
|                                                                                       |  |                             
|Other comprehensive income (loss), net of tax effects:                                 |  |                              |     |   |      |   |     |  
|Minimum pension liability adjustments (net of tax benefit of $9 and $-)                |  |                              | (16 | ) |      |   |    |  
|                                                                                       |  |                             
|Cash flow hedges:                                                                      |  |                              |     |   |      |   |     |  
|Net change in fair value of derivatives (net of tax (expense)/benefit of $(8) and $33) |  |                              | 15  |   |      |   | (62 | )
|Amounts realized in earnings during the period (net of tax expense of $11 and $6)      |  |                              | 20  |   |      |   | 12  |  
|                                                                                       |  |                              |     |   |      |   |     |  
|Total                                                                                  |  |                              | 19  |   |      |   | (50 | )
|                                                                                       |  |                              |     |   |      |   |     |  
|Comprehensive income from continuing operations                                        |  |                              | 425 |   |      |   | 78  |  
|                                                                                       |  |                             
|Components related to discontinued operations:                                         |  |                              |     |   |      |   |     |  
|                                                                                       |  |                             
|Income from discontinued operations, net of tax                                        |  |                              | 15  |   |      |   | 50  |  
|                                                                                       |  |                             
|Other comprehensive income (loss), net of tax effects:                                 |  |                              |     |   |      |   |     |  
|Minimum pension liability adjustments (net of tax expense of $- and $1)                |  |                              |    |   |      |   | 1   |  
|Foreign currency translation adjustment                                                |  |                              |    |   |      |   | 7   |  
|                                                                                       |  |                             
|Cash flow hedges:                                                                      |  |                              |     |   |      |   |     |  
|Net change in fair value of derivatives (net of tax benefit of $- and $8)              |  |                              |    |   |      |   | (19 | )
|Amounts realized in earnings during the period (net of tax expense of $- and $4)       |  |                              |    |   |      |   | 8   |  
|                                                                                       |  |                              |     |   |      |   |     |  
|Total                                                                                  |  |                              |    |   |      |   | (3  | )
|                                                                                       |  |                              |     |   |      |   |     |  
|Comprehensive income from discontinued operations                                      |  |                              | 15  |   |      |   | 47  |  
|                                                                                       |  |                              |     |   |      |   |     |  
|Comprehensive income                                                                   |  | $                            | 440 |   |      | $ | 125 |  
|                                                                                       |  |                              |     |   |      |   |     |  



See Notes to Financial Statements.



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TXU CORP. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)



|                                                                                                     |  |                              |      |   |      |   |      |  
|---------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                                     |  | Three Months Ended March 31, |     
|                                                                                                     |  | 2005                         |      |   | 2004 |  
|                                                                                                     |  | (millions of dollars)        |     
|Cash flows  operating activities:                                                                   |  |                              |      |   |      |   |      |  
|                                                                                                     |  |                             
|Income from continuing operations                                                                    |  | $                            | 406  |   |      | $ | 128  |  
|Adjustments to reconcile income from continuing operations to cash provided by operating activities: |  |                              |      |   |      |   |      |  
|Depreciation and amortization                                                                        |  |                              | 203  |   |      |   | 208  |  
|Deferred income taxes and investment tax credits  net                                               |  |                              | (49  | ) |      |   | 63   |  
|Net effect of unrealized mark-to-market valuations of commodity contracts                            |  |                              | 24   |   |      |   | 18   |  
|Decrease in accrued lease liability for out-of-service assets                                        |  |                              | (15  | ) |      |   |     |  
|Net gain from sale of assets                                                                         |  |                              | (13  | ) |      |   |     |  
|Change in regulatory-related liabilities                                                             |  |                              | (20  | ) |      |   | (20  | )
|Litigation settlement insurance recovery                                                             |  |                              | (35  | ) |      |   |     |  
|Charge for contract counterparty nonperformance                                                      |  |                              | 12   |   |      |   |     |  
|Stock-based compensation expense                                                                     |  |                              | 10   |   |      |   | 1    |  
|Bad debt expense                                                                                     |  |                              | 11   |   |      |   | 26   |  
|Changes in operating assets and liabilities                                                          |  |                              | (337 | ) |      |   | (86  | )
|                                                                                                     |  |                              |      |   |      |   |      |  
|Cash provided by operating activities                                                                |  |                              | 197  |   |      |   | 338  |  
|                                                                                                     |  |                             
|Cash flows  financing activities:                                                                   |  |                              |      |   |      |   |      |  
|Issuances of securities:                                                                             |  |                              |      |   |      |   |      |  
|Long-term debt                                                                                       |  |                              | 71   |   |      |   |     |  
|Common stock                                                                                         |  |                              | 2    |   |      |   | 8    |  
|Retirements/repurchases of securities:                                                               |  |                              |      |   |      |   |      |  
|Equity-linked debt                                                                                   |  |                              | (25  | ) |      |   |     |  
|Long-term debt                                                                                       |  |                              | (27  | ) |      |   | (723 | )
|Change in notes payable:                                                                             |  |                              |      |   |      |   |      |  
|Commercial paper                                                                                     |  |                              |     |   |      |   | 1    |  
|Banks                                                                                                |  |                              | 185  |   |      |   | 175  |  
|Cash dividends paid:                                                                                 |  |                              |      |   |      |   |      |  
|Common stock                                                                                         |  |                              | (134 | ) |      |   | (40  | )
|Preference stock                                                                                     |  |                              | (5   | ) |      |   | (5   | )
|Debt premium, discount, financing and reacquisition expenses                                         |  |                              | (23  | ) |      |   | (19  | )
|                                                                                                     |  |                              |      |   |      |   |      |  
|Cash provided by (used in) financing activities                                                      |  |                              | 44   |   |      |   | (603 | )
|                                                                                                     |  |                             
|Cash flows  investing activities:                                                                   |  |                              |      |   |      |   |      |  
|Capital expenditures                                                                                 |  |                              | (223 | ) |      |   | (147 | )
|Nuclear fuel                                                                                         |  |                              | (26  | ) |      |   | (47  | )
|Proceeds from sale of assets                                                                         |  |                              | 7    |   |      |   | 1    |  
|Other                                                                                                |  |                              | (6   | ) |      |   | 7    |  
|                                                                                                     |  |                              |      |   |      |   |      |  
|Cash used in investing activities                                                                    |  |                              | (248 | ) |      |   | (186 | )
|                                                                                                     |  |                              |      |   |      |   |      |  
|Discontinued operations                                                                              |  |                              |      |   |      |   |      |  
|Cash provided by (used in) operating activities                                                      |  |                              | (9   | ) |      |   | 74   |  
|Cash used in financing activities                                                                    |  |                              |     |   |      |   | (5   | )
|Cash used in investing activities                                                                    |  |                              |     |   |      |   | (20  | )
|Effect of exchange rates on cash                                                                     |  |                              |     |   |      |   | (6   | )
|                                                                                                     |  |                              |      |   |      |   |      |  
|Cash provided by (used in) discontinued operations                                                   |  |                              | (9   | ) |      |   | 43   |  
|                                                                                                     |  |                              |      |   |      |   |      |  
|Net change in cash and cash equivalents                                                              |  |                              | (16  | ) |      |   | (408 | )
|                                                                                                     |  |                             
|Cash and cash equivalents  beginning balance                                                        |  |                              | 106  |   |      |   | 829  |  
|                                                                                                     |  |                              |      |   |      |   |      |  
|Cash and cash equivalents  ending balance                                                           |  | $                            | 90   |   |      | $ | 421  |  
|                                                                                                     |  |                              |      |   |      |   |      |  



See Notes to Financial Statements.



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##### Table of Contents

TXU CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                                                 |  |                       |        |   |                  |   |        |  
|-------------------------------------------------------------------------------- |  | --------------------- | ------ | - | ---------------- | - | ------ | -
|                                                                                 |  | March 31, 2005        |        |   | December 31,2004 |  
|                                                                                 |  | (millions of dollars) |       
|ASSETS                                                                           |  |                       |        |   |                  |   |        |  
|Current assets:                                                                  |  |                       |        |   |                  |   |        |  
|Cash and cash equivalents                                                        |  | $                     | 90     |   |                  | $ | 106    |  
|Restricted cash                                                                  |  |                       | 52     |   |                  |   | 49     |  
|Accounts receivable  trade                                                      |  |                       | 873    |   |                  |   | 1,274  |  
|Income taxes receivable                                                          |  |                       | 39     |   |                  |   | 25     |  
|Inventories                                                                      |  |                       | 342    |   |                  |   | 320    |  
|Commodity contract assets                                                        |  |                       | 1,047  |   |                  |   | 546    |  
|Accumulated deferred income taxes                                                |  |                       | 162    |   |                  |   | 224    |  
|Other current assets                                                             |  |                       | 379    |   |                  |   | 249    |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total current assets                                                             |  |                       | 2,984  |   |                  |   | 2,793  |  
|                                                                                 |  |                      
|Investments:                                                                     |  |                       |        |   |                  |   |        |  
|Restricted cash                                                                  |  |                       | 32     |   |                  |   | 47     |  
|Other investments                                                                |  |                       | 679    |   |                  |   | 664    |  
|Property, plant and equipment  net                                              |  |                       | 16,761 |   |                  |   | 16,676 |  
|Goodwill                                                                         |  |                       | 542    |   |                  |   | 542    |  
|Regulatory assets  net                                                          |  |                       | 1,876  |   |                  |   | 1,891  |  
|Commodity contract assets                                                        |  |                       | 319    |   |                  |   | 315    |  
|Cash flow hedge and other derivative assets                                      |  |                       | 35     |   |                  |   | 6      |  
|Other noncurrent assets                                                          |  |                       | 330    |   |                  |   | 283    |  
|Assets held for sale (Note 2)                                                    |  |                       | 21     |   |                  |   | 24     |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total assets                                                                     |  | $                     | 23,579 |   |                  | $ | 23,241 |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|LIABILITIES, PREFERRED SECURITIES OF SUBSIDIARIES AND SHAREHOLDERS EQUITY       | 
|                                                                                 |  |                      
|Current liabilities:                                                             |  |                       |        |   |                  |   |        |  
|Notes payable  banks                                                            |  | $                     | 395    |   |                  | $ | 210    |  
|Long-term debt due currently                                                     |  |                       | 624    |   |                  |   | 229    |  
|Accounts payable  trade                                                         |  |                       | 809    |   |                  |   | 950    |  
|Commodity contract liabilities                                                   |  |                       | 810    |   |                  |   | 491    |  
|Litigation and other settlement accruals                                         |  |                       | 241    |   |                  |   | 391    |  
|Other current liabilities                                                        |  |                       | 1,259  |   |                  |   | 1,445  |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total current liabilities                                                        |  |                       | 4,138  |   |                  |   | 3,716  |  
|                                                                                 |  |                      
|Accumulated deferred income taxes                                                |  |                       | 2,600  |   |                  |   | 2,721  |  
|Investment tax credits                                                           |  |                       | 400    |   |                  |   | 405    |  
|Commodity contract liabilities                                                   |  |                       | 451    |   |                  |   | 347    |  
|Cash flow hedge and other derivative liabilities                                 |  |                       | 238    |   |                  |   | 195    |  
|Long-term debt, less amounts due currently                                       |  |                       | 11,970 |   |                  |   | 12,412 |  
|Other noncurrent liabilities and deferred credits                                |  |                       | 2,796  |   |                  |   | 2,762  |  
|Liabilities held for sale (Note 2)                                               |  |                       | 5      |   |                  |   | 6      |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total liabilities                                                                |  |                       | 22,598 |   |                  |   | 22,564 |  
|                                                                                 |  |                      
|Preferred securities of subsidiaries                                             |  |                       | 38     |   |                  |   | 38     |  
|Contingencies (Note 6)                                                           |  |                       |        |   |                  |   |        |  
|Shareholders equity (Note 5):                                                   |  |                       |        |   |                  |   |        |  
|Preferred stock  not subject to mandatory redemption                            |  |                       | 300    |   |                  |   | 300    |  
|Common stock without par value: Authorized shares: 1,000,000,000                 |  |                       |        |   |                  |   |        |  
|Outstanding shares: 239,755,380 and 239,852,880                                  |  |                       | 2      |   |                  |   | 2      |  
|Additional paid-in capital                                                       |  |                       | 2,808  |   |                  |   | 2,806  |  
|Retained deficit                                                                 |  |                       | (2,000 | ) |                  |   | (2,283 | )
|Accumulated other comprehensive loss                                             |  |                       | (167   | ) |                  |   | (186   | )
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total common stock equity                                                        |  |                       | 643    |   |                  |   | 339    |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total shareholders equity                                                       |  |                       | 943    |   |                  |   | 639    |  
|                                                                                 |  |                       |        |   |                  |   |        |  
|Total liabilities, preferred securities of subsidiaries and shareholders equity |  | $                     | 23,579 |   |                  | $ | 23,241 |  
|                                                                                 |  |                       |        |   |                  |   |        |  



See Notes to Financial Statements.



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##### Table of Contents

TXU CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1. SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS



TXU Corp. is a holding company conducting its operations principally through its TXU Energy Holdings and TXU Electric Delivery subsidiaries. TXU Energy
Holdings is engaged in electricity generation and retail and wholesale energy sales. TXU Electric Delivery is engaged in regulated electricity transmission and distribution operations.



Discontinued Businesses  Note 2 presents detailed information regarding the TXU Australia, TXU
Gas and other discontinued businesses. The condensed consolidated financial statements for all periods presented reflect the reclassification of the results of these businesses as discontinued operations.



Basis of Presentation The condensed consolidated
financial statements of TXU Corp. have been prepared in accordance with US GAAP and on the same basis as the audited financial statements included in its 2004 Form 10-K, except for the changes in composite depreciation rates discussed below. In the
opinion of management, all other adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. All intercompany items and transactions have
been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with US GAAP have been omitted pursuant to the rules and regulations of the SEC.
Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by US GAAP, they should be read in conjunction with the audited financial statements and related notes included in the 2004
Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year.



Effective January 1, 2005, TXU Corp. adjusted the composite depreciation rates related to lignite-fired generation facilities to better reflect their
useful lives, resulting in lower depreciation expense for the three months ended March 31, 2005 of $3 million ($2 million after-tax), or $0.01 per share.



All dollar amounts in the financial statements and tables in the notes, except per share amounts, are stated in millions of dollars unless otherwise
indicated.



Changes in Accounting Standards FIN 47 was issued in March 2005. This interpretation clarifies the term conditional asset retirement and requires recognition of a liability for the fair value of the conditional asset retirement obligation when incurred if the
liabilitys fair value can be reasonably estimated.



In
March 2005, the FASB ratified the consensus reached in EITF 04-6 Accounting for Stripping Costs in the Mining Industry. The consensus concludes that stripping costs incurred after a mine enters the production phase be treated as variable
inventory production cost, which makes such costs subject to inventory costing procedures in the period they are incurred.



TXU Corp. is currently evaluating the potential impact of these standards.



Earnings Per Share  Basic earnings per share available to common shareholders are based on the weighted
average number of common shares outstanding during the quarter. Diluted earnings per share include the effect of all potential issuances of common shares under certain securities and employee incentive arrangements. The 2005 diluted per share
results reflect a $1.94 per share negative impact associated with the November 2004 accelerated share repurchase program, which has not yet been settled. Because TXU Corp. intends to settle in cash the difference between the initial price of the
shares and the actual costs of the shares purchased and yet to be purchased by the counterparty under the program (the true-up), accounting rules require that earnings used in the diluted earnings per share calculation be reduced by the change in
the fair value of the true-up liability in the quarter, which has been estimated to be $462 million (without tax benefit). Also see Accelerated Share Repurchase Program in Note 6.



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##### Table of Contents

Diluted earnings per share for the three months ended March 31, 2005 would have reflected approximately 5
million shares of common stock issuable in connection with stock-based compensation plans and equity-linked debt securities. However, because of antidilution resulting from the accelerated share repurchase program, these dilutive shares had no
effect on the calculation of diluted earnings per share for the 2005 quarter.



For the three months ended March 31, 2004, the $750 million of 9% Exchangeable Preferred Membership Interests in TXU Energy Holdings were dilutive, and the related effects were included in the calculation of diluted
earnings per share. Assuming these securities were converted to TXU Corp. common stock at the beginning of the period at the exercise price of $13.1242 per share, 57.1 million shares would have been issued and net income would have increased by $13
million for the three months ended March 31, 2004, representing the after-tax distributions on the preferred membership interests and amortization of the related discount. The preferred membership interests were repurchased by TXU Corp. in April
2004.



2. DISCONTINUED OPERATIONS



The following summarizes the historical consolidated financial information
of the businesses reported as discontinued operations for the three months ended March 31, 2005 and 2004:



|                                              |  |        |    |              |   |               |  |   |        |   |  |       |    |   |  |   |    |  
|--------------------------------------------- |  | ------ | -- | ------------ | - | ------------- |  | - | ------ | - |  | ----- | -- | - |  | - | -- | -
|                                              |  | TXUGas |    | TXUAustralia |   | Pedrick- town |  |   | Europe |   |  | Total |   
|2005                                          |  |        |    |              |   |               |  |   |        |   |  |       |    |   |  |   |    |  
|Operating revenues                            |  | $      |   |              | $ |              |  | $ | 5      |   |  | $     |   |   |  | $ | 5  |  
|Operating costs and expenses                  |  |        |   |              |   |              |  |   | 7      |   |  |       |   |   |  |   | 7  |  
|                                              |  |        |    |              |   |               |  |   |        |   |  |       |    |   |  |   |    |  
|Operating loss before income taxes            |  |        |   |              |   |              |  |   | (2     | ) |  |       |   |   |  |   | (2 | )
|Income tax benefit                            |  |        |   |              |   |              |  |   | (1     | ) |  |       |   |   |  |   | (1 | )
|Credits (charges) related to exit (after-tax) |  |        | 17 |              |   | 2             |  |   | (2     | ) |  |       | (1 | ) |  |   | 16 |  
|                                              |  |        |    |              |   |               |  |   |        |   |  |       |    |   |  |   |    |  
|Income (loss) from discontinued operations    |  | $      | 17 |              | $ | 2             |  | $ | (3     | ) |  | $     | (1 | ) |  | $ | 15 |  
|                                              |  |        |    |              |   |               |  |   |        |   |  |       |    |   |  |   |    |  



|                                            |  |        |     |              |   |     |               |  |   |                           |   |  |         |    |   |        |   |     |       |  |   |    |   |  |   |     |  
|------------------------------------------- |  | ------ | --- | ------------ | - | --- | ------------- |  | - | ------------------------- | - |  | ------- | -- | - | ------ | - | --- | ----- |  | - | -- | - |  | - | --- | -
|                                            |  | TXUGas |     | TXUAustralia |   |     | Pedrick- town |  |   | Strategic Retail Services |   |  | Telecom |    |   | Mexico |   |     | Total | 
|2004                                        |  |        |     |              |   |     |               |  |   |                           |   |  |         |    |   |        |   |     |       |  |   |    |   |  |   |     |  
|Operating revenues                          |  | $      | 508 |              | $ | 355 |               |  | $ | 10                        |   |  | $       | 5  |   |        | $ | 45  |       |  | $ | 4  |   |  | $ | 927 |  
|Operating costs and expenses                |  |        | 440 |              |   | 266 |               |  |   | 12                        |   |  |         | 5  |   |        |   | 38  |       |  |   | 4  |   |  |   | 765 |  
|Other deductions (income)  net             |  |        | 2   |              |   | (1  | )             |  |   |                          |   |  |         | (1 | ) |        |   | 16  |       |  |   |   |   |  |   | 16  |  
|Interest income                             |  |        |    |              |   | (1  | )             |  |   |                          |   |  |         |   |   |        |   | (1  | )     |  |   |   |   |  |   | (2  | )
|Interest expense and related charges        |  |        | 8   |              |   | 46  |               |  |   |                          |   |  |         |   |   |        |   | 13  |       |  |   |   |   |  |   | 67  |  
|                                            |  |        |     |              |   |     |               |  |   |                           |   |  |         |    |   |        |   |     |       |  |   |    |   |  |   |     |  
|Operating income (loss) before income taxes |  |        | 58  |              |   | 45  |               |  |   | (2                        | ) |  |         | 1  |   |        |   | (21 | )     |  |   |   |   |  |   | 81  |  
|Income tax expense (benefit)                |  |        | 20  |              |   | 13  |               |  |   | (1                        | ) |  |         | 1  |   |        |   | (5  | )     |  |   | (1 | ) |  |   | 27  |  
|Charges related to exit (after-tax)         |  |        |    |              |   |    |               |  |   |                          |   |  |         | (2 | ) |        |   |    |       |  |   | (2 | ) |  |   | (4  | )
|                                            |  |        |     |              |   |     |               |  |   |                           |   |  |         |    |   |        |   |     |       |  |   |    |   |  |   |     |  
|Income (loss) from discontinued operations  |  | $      | 38  |              | $ | 32  |               |  | $ | (1                        | ) |  | $       | (2 | ) |        | $ | (16 | )     |  | $ | (1 | ) |  | $ | 50  |  
|                                            |  |        |     |              |   |     |               |  |   |                           |   |  |         |    |   |        |   |     |       |  |   |    |   |  |   |     |  



The TXU Europe
business and the TXU Australia business were previously reported in the International segment and the TXU Australia business was subsequently reported in its own segment. The TXU Gas business was previously reported in the Energy Delivery (now TXU
Electric Delivery) segment. The Pedricktown business and the strategic retail services operations were previously reported in the TXU Energy Holdings segment. The telecommunications and Mexico operations were previously reported in corporate and
other activities.



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##### Table of Contents

TXU Australia  In July 2004, TXU Corp. completed the sale of TXU Australia to
Singapore Power Ltd. for $1.9 billion in cash and $1.7 billion in assumed debt. TXU Australias operations consisted of a portfolio of competitive and regulated businesses, principally in Victoria and South Australia.



TXU Gas  In October 2004, Atmos Energy Corporation and
TXU Gas completed a merger by division, which resulted in the disposition of the operations of TXU Gas for $1.9 billion in cash (TXU Gas transaction). TXU Gas was largely a regulated business engaged in the purchase, transmission, distribution and
retail sale of natural gas. The credit in the 2005 quarter is due primarily to the expected resolution of a proposed working capital adjustment to the sales price.



Pedricktown In the second quarter of 2004, TXU Energy Holdings initiated a plan to sell the
Pedricktown, New Jersey 122 MW power production facility and exit the related power supply and gas transportation agreements.



Telecommunications In April 2004, TXU Corp. sold its telecommunications business for $524 million in cash and $3
million of assumed debt. The business was formerly a joint venture and was consolidated from March 1, 2003 through the sale date.



Strategic Retail ServicesIn December 2003, TXU Energy Holdings finalized a formal plan to sell its strategic retail services
business, which was engaged principally in providing energy management services. Substantially all disposition activities have been completed.



Mexico In January 2004, TXU Corp. completed the sale of its majority-owned gas distribution operations in Mexico for $11
million in notes receivable.



Balance sheet
 The following details the assets and liabilities held for sale as of March 31, 2005 and December 31, 2004:



|                              |  |                |    |                   |   |       |  |               |    |       |   |       |  |   |   |  |   |   
|----------------------------- |  | -------------- | -- | ----------------- | - | ----- |  | ------------- | -- | ----- | - | ----- |  | - | - |  | - | --
|                              |  | March 31, 2005 |    | December 31, 2004
|                              |  | Pedrick- town  |    | Other             |   | Total |  | Pedrick- town |    | Other |   | Total
|Current assets                |  | $              | 2  |                   | $ | 7     |  | $             | 9  |       | $ | 2     |  | $ | 7 |  | $ | 9 
|Property, plant and equipment |  |                | 12 |                   |   |      |  |               | 12 |       |   | 15    |  |   |  |  |   | 15
|                              |  |                |    |                   |   |       |  |               |    |       |   |       |  |   |   |  |   |   
|Assets held for sale          |  | $              | 14 |                   | $ | 7     |  | $             | 21 |       | $ | 17    |  | $ | 7 |  | $ | 24
|                              |  |                |    |                   |   |       |  |               |    |       |   |       |  |   |   |  |   |   
|Current liabilities           |  | $              | 1  |                   | $ |      |  | $             | 1  |       | $ | 3     |  | $ |  |  | $ | 3 
|Noncurrent liabilities        |  |                | 4  |                   |   |      |  |               | 4  |       |   | 3     |  |   |  |  |   | 3 
|                              |  |                |    |                   |   |       |  |               |    |       |   |       |  |   |   |  |   |   
|Liabilities held for sale     |  | $              | 5  |                   | $ |      |  | $             | 5  |       | $ | 6     |  | $ |  |  | $ | 6 
|                              |  |                |    |                   |   |       |  |               |    |       |   |       |  |   |   |  |   |   





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3. FINANCING ARRANGEMENTS



Short-term Borrowings At March 31, 2005, TXU Corp. had outstanding short-term borrowings consisting of
bank borrowings of $395 million at a weighted average interest rate of 3.27%.At December 31, 2004, TXU Corp. had outstanding bank borrowings of $210 million at a weighted average interest rate of 5.25%.



Credit Facilities At March 31, 2005, TXU
Corp. had access to credit facilities (some of which provide for long-term borrowings) as follows:



|                                     |  |               |                |                                            |                   |                   |                 |  |              |     |  |   |     |  |   |      
|------------------------------------ |  | ------------- | -------------- | ------------------------------------------ | ----------------- | ----------------- | --------------- |  | ------------ | --- |  | - | --- |  | - | -----
|Facility                             |  | Maturity Date |                | Authorized Borrowers                       |                   | At March 31, 2005
|                                     |  |               | Facility Limit |                                            | Letters of Credit |                   | Cash Borrowings |  | Availability
|Three-Year Revolving Credit Facility |  | June 2008     |                | TXU Energy Holdings, TXU Electric Delivery |                   | $                 | 1,400           |  | $            | 164 |  | $ | 350 |  | $ | 886  
|Five-Year Revolving Credit Facility  |  | March 2010    |                | TXU Energy Holdings, TXU Electric Delivery |                   |                   | 1,600           |  |              |    |  |   |    |  |   | 1,600
|Five-Year Revolving Credit Facility  |  | June 2010     |                | TXU Energy Holdings, TXU Electric Delivery |                   |                   | 500             |  |              |    |  |   |    |  |   | 500  
|Five-Year Revolving Credit Facility  |  | December 2009 |                | TXU Energy Holdings                        |                   |                   | 500             |  |              | 455 |  |   | 45  |  |   |     
|                                     |  |               |                |                                            |                   |                   |                 |  |              |     |  |   |     |  |   |      
|Total                                |  |               |                |                                            |                   | $                 | 4,000           |  | $            | 619 |  | $ | 395 |  | $ | 2,986
|                                     |  |               |                |                                            |                   |                   |                 |  |              |     |  |   |     |  |   |      



As reflected in the
above table, in March 2005 TXU Energy Holdings and TXU Electric Delivery amended their joint credit facilities, increasing the capacity from $2.5 billion to $3.5 billion, extending the maturity dates and reducing the borrowing costs. The amended and
restated credit facilities provide an aggregate borrowing and letter of credit capacity of $3.5 billion (with a maximum amount of $2.8 billion available for TXU Electric Delivery). The amended and restated facilities can be used for working capital
and general corporate purposes, including providing back-up for any future issuances of commercial paper by TXU Energy Holdings or TXU Electric Delivery and letters of credit. At March 31, 2005, there was no commercial paper outstanding.



In January 2005, TXU Corp.s $425 million credit facility was
terminated and $419 million of related outstanding letters of credit were effectively transferred to other facilities.



Sale of Receivables  TXU Corp. has established an accounts receivable securitization program. The activity under this program is
accounted for as a sale of accounts receivable in accordance with SFAS 140. Under the program, subsidiaries of TXU Corp. (originators) sell trade accounts receivable to TXU Receivables Company, a consolidated wholly-owned bankruptcy remote direct
subsidiary of TXU Corp., which sells undivided interests in the purchased accounts receivable for cash to special purpose entities established by financial institutions (the funding entities). Funding under the program as of March 31, 2005 was $505
million.



The maximum amount of funding availability under the
program is $700 million. Funding availability is increased through a credit ratings-based reduction (based on each originators credit rating) of customer deposits used to reduce the amount of undivided interests that could be sold. Undivided
interests will be reduced by 100% of the customer deposits for a Baa3/BBB- rating; 50% for a Baa2/BBB rating; and zero% for a Baa1/BBB+ and above rating.



All new trade receivables under the program generated by the originators are continuously purchased by TXU Receivables Company with the proceeds from
collections of receivables previously purchased. Changes in the amount of funding under the program, through changes in the amount of undivided interests sold by TXU Receivables Company, are generally due to seasonal variations in the level of
accounts receivable and changes in



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##### Table of Contents

collection trends. TXU Receivables Company has issued subordinated notes payable to the originators for the difference
between the face amount of the uncollected accounts receivable purchased, less a discount, and cash paid to the originators that was funded by the sale of the undivided interests. The balance of the subordinated notes payable was $277 million at
March 31, 2005 and $337 million at December 31, 2004.



The
discount from face amount on the purchase of receivables principally funds program fees paid by TXU Receivables Company to the funding entities, as well as a servicing fee paid by TXU Receivables Company to TXU Business Services, a direct subsidiary
of TXU Corp. The program fees (losses on sale), which consist primarily of interest costs on the underlying financing, were approximately $4 million and $3 million for the three-month periods ending March 31, 2005 and 2004, respectively and
approximated 3.5% and 2.1% for the first three months of 2005 and 2004, respectively, of the average funding under the program on an annualized basis; these fees represent the net incremental costs of the program to the originators and are reported
in SG&A expenses. The servicing fee, which totaled approximately $1 million and $2 million in the first three months of 2005 and 2004, respectively, compensates TXU Business Services for its services as collection agent, including maintaining
the detailed accounts receivable collection records.



The March
31, 2005 balance sheet reflects $782 million face amount of trade accounts receivable of TXU Energy Holdings and TXU Electric Delivery, reduced by $505 million of undivided interests sold by TXU Receivables Company. Funding under the program related
to continuing operations increased $31 million for the three months ended March 31, 2005 and decreased $50 million for the three months ended March 31, 2004. Funding increases or decreases under the program are reflected as operating cash flow
activity in the statement of cash flows. The carrying amount of the retained interests in the accounts receivable approximated fair value due to the short-term nature of the collection period.



Activities of TXU Receivables Company for the three months ended March 31,
2005 and 2004 were as follows:



|                                                                       |  |                              |        |   |      |   |        |  
|---------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                       |  | Three Months Ended March 31, |       
|                                                                       |  | 2005                         |        |   | 2004 |  
|Cash collections on accounts receivable                                |  | $                            | 1,640  |   |      | $ | 2,199  |  
|Face amount of new receivables purchased                               |  |                              | (1,611 | ) |      |   | (2,193 | )
|Discount from face amount of purchased receivables                     |  |                              | 5      |   |      |   | 5      |  
|Program fees paid                                                      |  |                              | (4     | ) |      |   | (3     | )
|Servicing fees paid                                                    |  |                              | (1     | ) |      |   | (2     | )
|Decrease in subordinated notes payable                                 |  |                              | (60    | ) |      |   | (6     | )
|                                                                       |  |                              |        |   |      |   |        |  
|Operating cash flows used by (provided to) TXU Corp. under the program |  |                              | (31    | ) |      |   |       |  
|Cash flows related to disposed TXU Gas business                        |  |                              |       |   |      |   | 50     |  
|                                                                       |  |                              |        |   |      |   |        |  
|Cash flows used by (provided to) continuing operations                 |  | $                            | (31    | ) |      | $ | 50     |  
|                                                                       |  |                              |        |   |      |   |        |  



Upon termination of
the program, cash flows to TXU Corp. would be delayed as collections of sold receivables would be used by TXU Receivables Company to repurchase the undivided interests sold instead of purchasing new receivables. The level of cash flows would
normalize in approximately 16 to 31 days.



Contingencies
Related to Sale of Receivables Program Although TXU Receivables Company expects to be able to pay its subordinated notes from the collections of purchased receivables, these notes are subordinated to the undivided interests of the
financial institutions in those receivables, and collections might not be sufficient to pay the subordinated notes. The program may be terminated if either of the following events occurs:



| | 1) | all of the originators cease to maintain their required fixed charge coverage ratio and debt to capital (leverage) ratio;
| | -- | -------------------------------------------------------------------------------------------------------------------------



| | 2) | the delinquency ratio (delinquent for 31 days) for the sold receivables, the default ratio (delinquent for 91 days or deemed uncollectible), the dilution ratio (reductions for
discounts, disputes and other allowances) or the days collection outstanding ratio exceed stated thresholds and the financial institutions do not waive such event of termination. The thresholds apply to the entire portfolio of sold receivables, not
separately to the receivables of each originator.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Under terms of the receivables sale program, all the originators are required to maintain specified fixed
charge coverage and leverage ratios (or provide a guarantee from a parent guarantor that meets the ratio requirements). The failure, by an originator or its parent guarantor, if any, to maintain the specified financial ratios would prevent that
originator from selling its accounts receivable under the program. If all the originators and the parent guarantor, if any, fail to maintain the specified financial ratios so that there are no eligible originators, the facility would terminate.



Long-term Debt  At March 31, 2005 and
December 31, 2004, the long-term debt of TXU Corp. consisted of the following:



|                                                                                   |  |                |       |                   |   |      
|---------------------------------------------------------------------------------- |  | -------------- | ----- | ----------------- | - | -----
|                                                                                   |  | March 31, 2005 |       | December 31, 2004
|TXU Energy Holdings                                                                |  |                |       |                   |   |      
|Pollution Control Revenue Bonds:                                                   |  |                |       |                   |   |      
|Brazos River Authority:                                                            |  |                |       |                   |   |      
|3.000% Fixed Series 1994A due May 1, 2029, remarketing date May 1, 2005(a)         |  | $              | 39    |                   | $ | 39   
|5.400% Fixed Series 1994B due May 1, 2029, remarketing date May 1, 2006(a)         |  |                | 39    |                   |   | 39   
|5.400% Fixed Series 1995A due April 1, 2030, remarketing date May 1, 2006(a)       |  |                | 50    |                   |   | 50   
|5.050% Fixed Series 1995B due June 1, 2030, remarketing date June 19, 2006(a)      |  |                | 114   |                   |   | 114  
|7.700% Fixed Series 1999A due April 1, 2033                                        |  |                | 111   |                   |   | 111  
|6.750% Fixed Series 1999B due September 1, 2034, remarketing date April 1, 2013(a) |  |                | 16    |                   |   | 16   
|7.700% Fixed Series 1999C due March 1, 2032                                        |  |                | 50    |                   |   | 50   
|2.350% Floating Series 2001A due October 1, 2030 (b)                               |  |                | 71    |                   |   |     
|4.750% Fixed Series 2001B due May 1, 2029, remarketing date November 1, 2006(a)    |  |                | 19    |                   |   | 19   
|5.750% Fixed Series 2001C due May 1, 2036, remarketing date November 1, 2011(a)    |  |                | 217   |                   |   | 217  
|2.330% Floating Series 2001D due May 1, 2033 (b)                                   |  |                | 268   |                   |   | 268  
|2.850% Floating Taxable Series 2001I due December 1, 2036(b)                       |  |                | 62    |                   |   | 62   
|2.350% Floating Series 2002A due May 1, 2037(b)                                    |  |                | 45    |                   |   | 45   
|6.750% Fixed Series 2003A due April 1, 2038, remarketing date April 1, 2013(a)     |  |                | 44    |                   |   | 44   
|6.300% Fixed Series 2003B due July 1, 2032                                         |  |                | 39    |                   |   | 39   
|6.750% Fixed Series 2003C due October 1, 2038                                      |  |                | 52    |                   |   | 52   
|5.400% Fixed Series 2003D due October 1, 2029, remarketing date October 1, 2014(a) |  |                | 31    |                   |   | 31   
|                                                                                   |  |               
|Sabine River Authority of Texas:                                                   |  |                |       |                   |   |      
|6.450% Fixed Series 2000A due June 1, 2021                                         |  |                | 51    |                   |   | 51   
|5.500% Fixed Series 2001A due May 1, 2022, remarketing date November 1, 2011(a)    |  |                | 91    |                   |   | 91   
|5.750% Fixed Series 2001B due May 1, 2030, remarketing date November 1, 2011(a)    |  |                | 107   |                   |   | 107  
|5.800% Fixed Series 2003A due July 1, 2022                                         |  |                | 12    |                   |   | 12   
|6.150% Fixed Series 2003B due August 1, 2022                                       |  |                | 45    |                   |   | 45   
|                                                                                   |  |               
|Trinity River Authority of Texas:                                                  |  |                |       |                   |   |      
|6.250% Fixed Series 2000A due May 1, 2028                                          |  |                | 14    |                   |   | 14   
|5.000% Fixed Series 2001A due May 1, 2027, remarketing date November 1, 2006(a)    |  |                | 37    |                   |   | 37   
|                                                                                   |  |               
|Other:                                                                             |  |                |       |                   |   |      
|6.875% TXU Mining Fixed Senior Notes due August 1, 2005                            |  |                | 30    |                   |   | 30   
|6.125% Fixed Senior Notes due March 15, 2008(c)                                    |  |                | 250   |                   |   | 250  
|7.000% Fixed Senior Notes due March 15, 2013                                       |  |                | 1,000 |                   |   | 1,000
|3.920% Floating Rate Senior Notes due January 17, 2006(d)                          |  |                | 400   |                   |   | 400  
|Capital lease obligations                                                          |  |                | 8     |                   |   | 9    
|Fair value adjustments related to interest rate swaps                              |  |                | 10    |                   |   | 15   
|                                                                                   |  |                |       |                   |   |      
|Total TXU Energy Holdings                                                          |  |                | 3,322 |                   |   | 3,257





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|                                                                                             |  |                |        |   |                   |   |        |  
|-------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                             |  | March 31, 2005 |        |   | December 31, 2004 |  
|TXU Electric Delivery                                                                        |  |                |        |   |                   |   |        |  
|6.750% Fixed First Mortgage Bonds due July 1, 2005                                           |  |                | 92     |   |                   |   | 92     |  
|6.375% Fixed Senior Secured Notes due May 1, 2012                                            |  |                | 700    |   |                   |   | 700    |  
|7.000% Fixed Senior Secured Notes due May 1, 2032                                            |  |                | 500    |   |                   |   | 500    |  
|6.375% Fixed Senior Secured Notes due January 15, 2015(c)                                    |  |                | 500    |   |                   |   | 500    |  
|7.250% Fixed Senior Secured Notes due January 15, 2033                                       |  |                | 350    |   |                   |   | 350    |  
|5.000% Fixed Debentures due September 1, 2007(c)                                             |  |                | 200    |   |                   |   | 200    |  
|7.000% Fixed Debentures due September 1, 2022                                                |  |                | 800    |   |                   |   | 800    |  
|Unamortized discount                                                                         |  |                | (18    | ) |                   |   | (19    | )
|                                                                                             |  |                |        |   |                   |   |        |  
|Sub-total                                                                                    |  |                | 3,124  |   |                   |   | 3,123  |  
|                                                                                             |  |               
|TXU Electric Delivery Transition Bond Company LLC(e)                                         |  |                |        |   |                   |   |        |  
|2.260% Fixed Series 2003 Bonds due in semiannual installments through February 15, 2007      |  |                | 59     |   |                   |   | 80     |  
|4.030% Fixed Series 2003 Bonds due in semiannual installments through February 15, 2010      |  |                | 122    |   |                   |   | 122    |  
|4.950% Fixed Series 2003 Bonds due in semiannual installments through February 15, 2013      |  |                | 130    |   |                   |   | 130    |  
|5.420% Fixed Series 2003 Bonds due in semiannual installments through August 15, 2015        |  |                | 145    |   |                   |   | 145    |  
|3.520% Fixed Series 2004 Bonds due in semiannual installments through November 15, 2009      |  |                | 270    |   |                   |   | 270    |  
|4.810% Fixed Series 2004 Bonds due in semiannual installments through November 15, 2012      |  |                | 221    |   |                   |   | 221    |  
|5.290% Fixed Series 2004 Bonds due in semiannual installments through May 15, 2016           |  |                | 290    |   |                   |   | 290    |  
|                                                                                             |  |                |        |   |                   |   |        |  
|Total TXU Electric Delivery Transition Bond Company LLC                                      |  |                | 1,237  |   |                   |   | 1,258  |  
|                                                                                             |  |                |        |   |                   |   |        |  
|Total TXU Electric Delivery                                                                  |  |                | 4,361  |   |                   |   | 4,381  |  
|                                                                                             |  |               
|US Holdings                                                                                  |  |                |        |   |                   |   |        |  
|7.170% Fixed Senior Debentures due August 1, 2007                                            |  |                | 10     |   |                   |   | 10     |  
|9.580% Fixed Notes due in semiannual installments through December 4, 2019                   |  |                | 68     |   |                   |   | 68     |  
|8.254% Fixed Notes due in quarterly installments through December 31, 2021                   |  |                | 63     |   |                   |   | 64     |  
|3.543% Floating Rate Junior Subordinated Debentures, Series D due January 30, 2037(d)        |  |                | 1      |   |                   |   | 1      |  
|8.175% Fixed Junior Subordinated Debentures, Series E due January 30, 2037                   |  |                | 8      |   |                   |   | 8      |  
|                                                                                             |  |                |        |   |                   |   |        |  
|Total US Holdings                                                                            |  |                | 150    |   |                   |   | 151    |  
|                                                                                             |  |               
|TXU Corp.                                                                                    |  |                |        |   |                   |   |        |  
|6.375% Fixed Senior Notes Series C due January 1, 2008(c)                                    |  |                | 200    |   |                   |   | 200    |  
|6.375% Fixed Senior Notes Series J due June 15, 2006(c)                                      |  |                | 683    |   |                   |   | 683    |  
|4.446% Fixed Senior Notes Series K due November 16, 2006                                     |  |                | 50     |   |                   |   | 50     |  
|5.450% Fixed Senior Notes Series L due November 16, 2007 remarketing date August 16, 2005(f) |  |                | 76     |   |                   |   | 101    |  
|5.800% Fixed Senior Notes Series M due May 16, 2008 remarketing date February 16, 2006(f)    |  |                | 184    |   |                   |   | 184    |  
|4.800% Fixed Senior Notes Series O due November 15, 2009(c)                                  |  |                | 1,000  |   |                   |   | 1,000  |  
|5.550% Fixed Senior Notes Series P due November 15, 2014(c)                                  |  |                | 1,000  |   |                   |   | 1,000  |  
|6.500% Fixed Senior Notes Series Q due November 15, 2024(c)                                  |  |                | 750    |   |                   |   | 750    |  
|6.550% Fixed Senior Notes Series R due November 15, 2034                                     |  |                | 750    |   |                   |   | 750    |  
|8.820% Building Financing due semiannually through February 11, 2022                         |  |                | 115    |   |                   |   | 120    |  
|4.640% Floating Convertible Senior Notes due July 15, 2033(d)                                |  |                | 25     |   |                   |   | 25     |  
|Fair value adjustments related to interest rate swaps                                        |  |                | (62    | ) |                   |   |       |  
|Unamortized discount                                                                         |  |                | (10    | ) |                   |   | (11    | )
|                                                                                             |  |                |        |   |                   |   |        |  
|Total TXU Corp.                                                                              |  |                | 4,761  |   |                   |   | 4,852  |  
|                                                                                             |  |                |        |   |                   |   |        |  
|Total TXU Corp. consolidated                                                                 |  |                | 12,594 |   |                   |   | 12,641 |  
|Less amount due currently                                                                    |  |                | (624   | ) |                   |   | (229   | )
|                                                                                             |  |                |        |   |                   |   |        |  
|Total long-term debt                                                                         |  | $              | 11,970 |   |                   | $ | 12,412 |  
|                                                                                             |  |                |        |   |                   |   |        |  

---

|(a) | These series are in the multiannual mode and are subject to mandatory tender prior to maturity on the mandatory remarketing date. On such date, the interest rate and interest rate
period will be reset for the bonds.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Interest rates in effect at March 31, 2005. These series are in a weekly rate mode and are classified as long-term as they are supported by long-term irrevocable letters of credit.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Interest rates swapped to floating on an aggregate $3.4 billion principal amount.
|--- | ---------------------------------------------------------------------------------

|(d) | Interest rates in effect at March 31, 2005.
|--- | -------------------------------------------

|(e) | These bonds are nonrecourse to TXU Electric Delivery.
|--- | -----------------------------------------------------

|(f) | Equity-linked.
|--- | --------------



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Debt Issuances and Retirements in 2005



In March 2005, as part of its ongoing liability management initiative, TXU
Corp. repurchased $25 million principal amount of its outstanding Series L equity-linked debt securities for $36 million. The $11 million premium primarily reflects the in-the-money value (to holders) of the associated equity purchase contracts, and
was charged to additional paid-in-capital.



In January 2005,
TXU Energy Holdings remarketed and converted to floating rate mode the Brazos River Authority Series 2001A pollution control revenue bonds with an aggregate principal amount of $71 million. The bonds were purchased upon mandatory tender in April
2004.



Other retirements of long-term debt in the first three
months of 2005 totaling $27 million represent payments at scheduled maturity dates.



Fair Value Hedges TXU Corp. uses fair value hedging strategies to manage its exposure to fixed interest rates on long-term debt. At March 31, 2005, $3.4 billion of fixed rate debt had been
effectively converted to variable rates through interest rate swap transactions, expiring through 2024. In the first quarter of 2005, TXU Corp. entered into interest rates swaps associated with $1.1 billion of fixed rate debt. These swaps qualified
for and have been designated as fair value hedges using the short-cut method of hedge accounting provided by SFAS 133. As such, TXU Corp. assumes that changes in the value of the derivative are exactly offset by changes in the value of the debt;
therefore, there is no hedge ineffectiveness recognized. The table below reflects interest rates in effect at March 31, 2005 relating to the $3.4 billion of swapped fixed rate debt.



|                     |  |                        |      |   |      |   |      |      |  |   |      |   |  |             |      |   |           |   |       |   |  |   |       |  
|-------------------- |  | ---------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | ----------- | ---- | - | --------- | - | ----- | - |  | - | ----- | -
|                     |  | Expected Maturity Date |     
|                     |  | 2006                   |      |   | 2007 |   |      | 2008 |  |   | 2009 |   |  | There-After |      |   | 2005Total |  
|Fixed to variable    |  | $                      | 600  |   |      | $ | 200  |      |  | $ | 450  |   |  | $           | 450  |   |           | $ | 1,700 |   |  | $ | 3,400 |  
|Average pay rate     |  |                        | 7.52 | % |      |   | 5.44 | %    |  |   | 6.78 | % |  |             | 3.47 | % |           |   | 4.19  | % |  |   | 5.10  | %
|Average receive rate |  |                        | 6.38 | % |      |   | 5.00 | %    |  |   | 6.24 | % |  |             | 4.80 | % |           |   | 6.19  | % |  |   | 5.97  | %



The fair value
adjustments reported above in the long-term debt table include $87 million representing changes in the fair market value of hedged fixed rate debt, partially offset by $35 million in favorable settlements of fixed-to-variable swaps previously
designated as accounting hedges that are being amortized to earnings over the remaining life of the associated debt.



4. TAX BENEFIT RELATED TO TXU EUROPE



An income tax benefit of $26 million for the quarter ended March 31, 2005 reflects recognition of $138 million in additional tax benefit related to the
2002 TXU Europe worthlessness deduction. The additional tax benefit in the quarter reflects identification of tax planning strategies TXU Corp. would implement to ensure utilization of capital losses associated with the write-off of the investment
in TXU Europe. Also see Note 6 regarding income tax contingencies.



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##### Table of Contents

5. SHAREHOLDERS EQUITY



At its February 2005 meeting, the Board of Directors declared a quarterly dividend of $0.5625 a share, that was paid April
1, 2005, to shareholders of record on March 4, 2005 and at its October 2004 meeting declared a quarterly dividend of $0.5625, paid on January 3, 2005 to shareholders of record as of December 3, 2004.



Dividend Restrictions Terms of TXU Corp.s Series B
preference stock restrict TXU Corp.s payment of common stock dividends while any preference share payment default exists.



TXU Corp. is required to make contract adjustment payments to the holders of equity-linked debt securities. TXU Corp. has the right to defer the contract
adjustment payments, but any such election would subject TXU Corp. to restrictions on the payment of dividends on its common stock. TXU Corp. has no plans to defer these contract adjustment payments.



As a holding company, TXU Corp. depends, in part, on the dividends it
receives from its subsidiaries. US Holdings outstanding preferred stock limits its ability to pay dividends on its common stock unless immediately after such dividend, US Holdings earned surplus is greater than one and one-half times the
full annual dividend on the preferred stock. US Holdings debentures contain provisions that restrict the payment of dividends during any interest payment deferral period or while any payment default exists. These provisions are not expected to
restrict US Holdings ability to pay dividends to TXU Corp. The mortgage of TXU Electric Delivery restricts TXU Electric Deliverys payment of dividends to the amount of its retained earnings.



The following table presents the changes to common stock equity during the
three months ended March 31, 2005:



|                                                              |  |             |   |                          |   |       |                 |  |   |                                          |   |  |                        |      |   |  |   |      |  
|------------------------------------------------------------- |  | ----------- | - | ------------------------ | - | ----- | --------------- |  | - | ---------------------------------------- | - |  | ---------------------- | ---- | - |  | - | ---- | -
|                                                              |  | CommonStock |   | AdditionalPaid-inCapital |   |       | RetainedDeficit |  |   | AccumulatedOtherComprehensiveGain (Loss) |   |  | TotalCommonStockEquity |     
|Balance at December 31, 2004                                  |  | $           | 2 |                          | $ | 2,806 |                 |  | $ | (2,283                                   | ) |  | $                      | (186 | ) |  | $ | 339  |  
|Common stock issuances                                        |  |             |  |                          |   | 2     |                 |  |   |                                         |   |  |                        |     |   |  |   | 2    |  
|Equity linked securities repurchased                         |  |             |  |                          |   | (11   | )               |  |   |                                         |   |  |                        |     |   |  |   | (11  | )
|Cash flow hedges                                              |  |             |  |                          |   |      |                 |  |   |                                         |   |  |                        | 35   |   |  |   | 35   |  
|Minimum pension liability adjustments                         |  |             |  |                          |   |      |                 |  |   |                                         |   |  |                        | (16  | ) |  |   | (16  | )
|Dividends                                                     |  |             |  |                          |   |      |                 |  |   | (139                                     | ) |  |                        |     |   |  |   | (139 | )
|Net income                                                    |  |             |  |                          |   |      |                 |  |   | 421                                      |   |  |                        |     |   |  |   | 421  |  
|Effects of awards under Long-Term Incentive Compensation Plan |  |             |  |                          |   | 11    |                 |  |   |                                         |   |  |                        |     |   |  |   | 11   |  
|Other                                                         |  |             |  |                          |   |      |                 |  |   | 1                                        |   |  |                        |     |   |  |   | 1    |  
|                                                              |  |             |   |                          |   |       |                 |  |   |                                          |   |  |                        |      |   |  |   |      |  
|Balance at March 31, 2005                                     |  | $           | 2 |                          | $ | 2,808 |                 |  | $ | (2,000                                   | ) |  | $                      | (167 | ) |  | $ | 643  |  
|                                                              |  |             |   |                          |   |       |                 |  |   |                                          |   |  |                        |      |   |  |   |      |  





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6. CONTINGENCIES AND COMMITMENTS



Accelerated Share Repurchase Program In November 2004, TXU Corp. entered into an agreement with a
broker-dealer counterparty under which TXU Corp. repurchased 52.5 million shares of its outstanding common stock at an initial price of $64.57 per share for a total of $3.4 billion. Under the agreement, the counterparty immediately borrows shares
that are sold to and canceled by TXU Corp. and in turn purchases shares in the open market over a subsequent time period; the agreement is subject to a future contingent purchase price adjustment based on the actual price of the shares purchased by
the counterparty. The price adjustment can be settled, at TXU Corp.s option, in cash or in shares of its common stock. As of May 4, 2005, the counterparty had repurchased 85% of the shares under the agreement at an average price per share of
$72.83. Assuming the counterparty repurchased the remaining shares at a price per share equal to $82.42, which was the closing price of TXU Corp.s common stock on May 4, 2005, TXU Corp. would be required to pay $547 million (including related
settlement fees and expenses) in cash and/or issue 6.6 million shares of TXU Corp. common stock to the counterparty in settlement of the transaction. The settlement amount can increase or decrease depending upon the actual price paid for the shares
repurchased by the counterparty under the program. The settlement is expected to occur in the second quarter of 2005, depending upon the timing and pace of the counterpartys purchases. TXU Corp. currently intends to settle the program in cash.
Also see Note 1, Earnings per Share.



Guarantees
TXU Corp. has entered into contracts that contain guarantees to outside parties that could require performance or payment under certain conditions. These guarantees are described below.



Project development guarantees In 1990, US Holdings repurchased
an electric co-ops minority ownership interest in the Comanche Peak nuclear generation plant and assumed the co-ops indebtedness to the US government for the facilities. US Holdings is making principal and interest payments to the co-op
in an amount sufficient for the co-op to make payments on its indebtedness. US Holdings guaranteed the co-ops payments, and in the event that the co-op fails to make its payments on the indebtedness, the US government would assume the
co-ops rights under the agreement, and such payments would then be owed directly by US Holdings. At March 31, 2005, the balance of the indebtedness was $131 million with maturities of principal and interest extending to December 2021. The
indebtedness is secured by a lien on the purchased facilities.



Residual value guarantees in operating leases TXU Corp. is the lessee under various operating leases that obligate it to guarantee the residual values of the leased facilities. Accounting rules require the recording of a
liability for all guarantees entered into subsequent to December 31, 2002. At March 31, 2005, the aggregate maximum amount of residual values guaranteed was approximately $211 million with an estimated residual recovery of approximately $142
million. The substantial majority of the maximum guarantee amount relates to leases entered into prior to December 31, 2002. The average life of the lease portfolio is approximately seven years.



Letters of credit TXU Energy Holdings has entered into various
agreements that require letters of credit for financial assurance purposes. Approximately $455 million of letters of credit were outstanding at March 31, 2005 to support existing floating rate pollution control revenue bond debt of approximately
$445 million. The letters of credit are available to fund the payment of such debt obligations. These letters of credit have expiration dates in 2009.



TXU Energy Holdings has outstanding letters of credit in the amount of $9 million for miscellaneous credit support requirements. Although the average life
of the letters of credit is approximately one year, the obligation to provide guarantees is ongoing.



TXU Energy Holdings has outstanding letters of credit in the amount of $119 million to support hedging and risk management margin requirements in the
normal course of business. As of March 31, 2005, approximately 62% of the obligations supported by these letters of credit mature within one year, and substantially all of the remainder mature in the next two years.



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Surety bonds TXU Corp. has outstanding surety bonds of approximately $30 million to support
performance under various subsidiary contracts and legal obligations in the normal course of business. The term of the surety bond obligations is approximately one year.



Other US Holdings has entered into contracts with public agencies to purchase cooling water for use in the
generation of electric energy and has agreed, in effect, to guarantee the principal amount of $6 million at March 31, 2005, and interest on bonds issued by the agencies to finance the reservoirs from which the water is supplied. The bonds mature in
2011 and have an interest rate of 5.5%. US Holdings is required to make periodic payments equal to such principal and interest. In addition, US Holding is obligated to pay certain variable costs of operating and maintaining the reservoirs. US
Holdings has assigned to a municipality all its contract rights and obligations in connection with $1 million remaining principal amount of bonds at March 31, 2005, issued for similar purposes, which had previously been guaranteed by US Holdings. US
Holdings is, however, contingently liable in the event of default by the municipality.



In connection with the TXU Gas transaction, on October 1, 2004, TXU Corp. agreed, for a period of three years, to indemnify Atmos Energy Corporation for certain qualified environmental claims that may arise in
relation to the assets acquired by Atmos Energy Corporation. TXU Corp. is not required to indemnify Atmos Energy Corporation until the aggregate of all such qualified claims exceeds $10 million, and TXU Corp. is only required to indemnify Atmos
Energy Corporation for 50% of qualified claims between $10 million and $20 million. The maximum amount that TXU Corp. would be required to pay Atmos Energy Corporation pursuant to this environmental indemnity is $192.5 million. In addition, TXU
Corp. agreed to indemnify Atmos Energy Corporation for up to $500 million for any liability related to assets retained by TXU Corp., including certain inactive gas plant sites not acquired by Atmos Energy Corporation, and up to $1.4 billion for
contingent liabilities associated with preclosing tax and employee related matters. In each case, TXU Corp.s indemnification is limited to 10 years. The maximum aggregate amount that TXU Corp. may be required to pay is $1.925 billion. The
estimated fair value of the indemnification recorded upon completion of the TXU Gas transaction was $2.5 million.



In 1992, a discontinued engineering and construction business of TXU Gas completed construction of a plant, the performance of which is warranted by TXU
Gas through 2008. The maximum contingent liability under the guarantee is approximately $110 million. No claims have been asserted under the guarantee and none are anticipated. TXU Corp. retains this contingent liability under the terms of the TXU
Gas transaction agreement.



Income Tax
Contingencies  TXU Corp. and certain of its subsidiaries are currently under audit by the IRS with respect to tax returns for various tax periods as discussed below, and are subject to audit by other taxing authorities and by the IRS
for subsequent tax periods. The amount and timing of any tax assessments resulting from these audits are uncertain, and could have a material effect on TXU Corp.s liquidity and results of operations. Certain audit matters as to which
management believes there is a reasonable possibility of a material future tax assessment are discussed below. Other than as discussed below under TXU Europe, there have been no material adjustments to tax reserves.



TXU Corp. 1997-2002 AuditThe IRS is currently
examining TXU Corp.s federal income tax returns for 1997-2002. In addition to proposed adjustments with respect to the worthlessness of TXU Corp.s investment in TXU Europe (discussed separately below), the IRS has issued notices of
proposed adjustment with respect to several other items. The IRS will likely issue additional proposed adjustments during the spring of 2005, and is expected to complete its examination by the third quarter of 2005. TXU Corp. expects to protest a
number of adjustments, and expects that the protested issues will not be resolved until after 2005. Management believes that reserves recorded for potential adjustments to TXU Corp.s 1997-2002 tax returns are adequate to provide for the
expected outcome of the IRSs proposed adjustments.



TXU Corp. 2003-2005 AuditTXU Corp. expects that the IRS will commence an examination of its 2003 through 2005 tax returns during 2006. Consistent with its experience in prior audits, TXU Corp. expects that the
IRS will propose adjustments to the tax returns and that TXU Corp. will incur some liability to resolve those



15



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##### Table of Contents

proposed adjustments with the IRS. The nature and amount of any such proposed adjustments is uncertain and will likely
not be known for several years. TXU Corp. has recorded reserves related to potential audit adjustments, representing the estimated tax expense to be incurred as a result of such audit adjustments.



TXU Gas (formerly ENSERCH Corporation) 1993 Audit In the first
quarter of 2005, the statute of limitations for the IRS to issue assessments on 1993 expired. The IRS filed a notice of deficiency for an additional $7.5 million of tax under an alternative position to protect itself in the event a refund suit was
pursued by TXU Gas on a transaction related to the sale of a business in 1993. TXU Gas believes the additional deficiency is without merit and is evaluating various alternatives for resolving the deficiency notice prior to the deadline in June 2005.



TXU Gas 1994-1997 Audit  The IRS has completed
its examination of the ENSERCH Corporation 1994-1997 federal income tax returns. Prior to expiration of the statute of limitations on assessment during the first quarter, the IRS had proposed only minor adjustments. Moreover, the IRS was expected to
issue a statutory notice of deficiency on or before March 13, 2005, challenging certain tax effects of the December 1994 incorporation of Enserch Exploration Partners, L.P. (the 1994 Transaction). TXU Gas had estimated that the IRS would propose
adjustments of $181 million (including interest through December 31, 2004). Management believed that the reported tax treatment of the 1994 Transaction was proper, and intended to challenge any IRS proposed adjustments. In March of 2005, the IRS
issued a notice of deficiency for 1994 and claimed additional tax for the period of approximately $8.1 million on a basis unrelated to the 1994 Transaction. Management believes the deficiency is erroneous and is evaluating various alternatives to
resolve the outstanding notice of deficiency and settle the 1994 Transaction matter. The IRS has issued no change letters for the 1995, 1996 and 1997 TXU Gas and related audits.



TXU Europe On its US federal income tax return for calendar
year 2002, TXU Corp. claimed an ordinary loss deduction related to the worthlessness of TXU Corp.s investment in TXU Europe, the tax benefit of which is estimated to be $983 million (assuming the deduction is sustained on audit). Due to a
number of uncertainties regarding the proper tax treatment of the worthlessness loss, no portion of the tax benefit related to TXU Corp.s 2002 write-off of its investment in TXU Europe was recognized in income prior to the second quarter of
2004.



In June 2004, the IRS issued a preliminary notice of
proposed adjustment (subsequently amended in September 2004) proposing to disallow the 2002 worthlessness deduction and treat the worthlessness as a capital loss (deductible only against capital gains). In addition, in 2004 TXU Corp. revised the
estimates of capital losses and ordinary deductions expected from the worthlessness deduction utilization. Accordingly, in 2004 TXU Corp. recorded a tax benefit of $755 million related to the TXU Europe worthlessness deduction, which reflects
expected utilization of the capital loss deduction against capital gains realized in 2004 and prior periods. The benefit recognized also included $220 million for deductions related to the write-off of the investment in TXU Europe expected to be
sustained as ordinary as a result of the preliminary notice.



The tax benefits recognized are based on the notice of proposed adjustment, adjusted to exclude the effects of elements of the IRS notice that TXU Corp. believes are without merit and unlikely to be sustained. While the notice of proposed
adjustment is not binding on the IRS and therefore it is uncertain what positions the IRS might ultimately assert or what, if any, tax liability might result, TXU Corp. believes that the possibility of the IRS adopting a more adverse position is
remote.



If TXU Corp.s ordinary loss deduction claimed on
the 2002 tax return is not sustained, TXU Corp. would be required to repay approximately $459 million in tax refunds previously received (including interest through March 31, 2005) based on the assumptions used to determine the tax benefits
recognized after receipt of the notice of proposed adjustments, and before taking into account other potential IRS adjustments to TXUs 1997-2002 tax returns. In addition, TXU Corp. would owe additional tax of $116 million related to 2004.
These amounts are reported as other noncurrent liabilities in the March 31, 2005 balance sheet. No material earnings charge is expected with respect to any such repayment. TXU Corp. is unable to predict the timing of any such repayment, but
currently expects that it would not be made prior to 2007.



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##### Table of Contents

TXU Corp. believes that its original tax reporting of the worthlessness of its investment in TXU Europe
as an ordinary deduction was proper and intends to protest the IRSs proposed adjustments. If TXU Corp.s position is sustained, approximately $69 million would be recognized in earnings.



Also see Note 4 for discussion of $138 million in additional tax benefits
recognized in the first quarter of 2005 related to TXU Europe.



Legal Proceedings  On March 18, 2005, TXU Corp. received a subpoena from the SEC. The subpoena requires TXU Corp. to produce documents and other information for the period from January 1, 2001 to March 31, 2003 relating
to, among other things, the financial distress at TXU Europe during 2002 and the resulting financial condition of TXU Corp., TXU Corp.s reduction of its quarterly dividend in October 2002, and the following two previously disclosed claims
against TXU Corp. and certain other persons named in such claims: (i) a lawsuit brought in April 2003 by a former employee of TXU Portfolio Management, William J. Murray (Murray Litigation) and (ii) various consolidated lawsuits brought by various
shareholders of TXU Corp. during late 2002 and January 2003 (Shareholders Litigation). The documents accompanying the subpoena state that (i) the SEC is conducting a fact-finding inquiry for purposes of allowing it to determine whether there
have been any violations of the federal securities laws and (ii) the request does not mean the SEC has concluded that TXU Corp. or any other person has violated the law. Although TXU Corp. cannot predict the outcome of the SEC inquiry, as
previously disclosed, TXU Corp. does not believe that there is any merit to the claims made in the Murray Litigation and it intends to vigorously defend such litigation. In addition, TXU Corp. has executed a memorandum of understanding regarding the
settlement of the Shareholders Litigation. TXU Corp. expects to execute a final agreement containing the terms of such settlement during the second quarter of 2005. TXU Corp. intends to cooperate with the SEC and is in the process of
responding to the subpoena.



On February 18, 2005, a lawsuit
was filed by Utility Choice, L.P. and Cirro Group, Inc. in the United States District Court for the Southern District of Texas, Houston Division, against TXU Corp. and certain of its subsidiaries, as well as various other wholesale market
participants doing business in ERCOT, claiming generally that defendants engaged in a variety of anticompetitive conduct, including market manipulation in violation of antitrust and other laws. TXU Corp. believes that claims against it and its
subsidiary companies are without merit, and TXU Corp. and its subsidiaries intend to vigorously defend the lawsuit. TXU Corp. is, however, unable to estimate any possible loss or predict the outcome of this action.



Between October 19 and December 30, 2004, ten lawsuits were filed in various
California superior courts by purported customers against TXU Corp., TXU Energy Trading Company and TXU Energy Services and other marketers, traders, transporters and sellers of natural gas in California. Plaintiffs allege that beginning at least by
the summer of 2000, defendants manipulated and fixed at artificially high levels natural gas prices in California in violation of the Cartwright Act and other California state laws. These lawsuits have been coordinated in the San Diego Superior
Court with numerous other natural gas actions as In re Natural Gas Anti-Trust Cases I, II, III, IV and V. TXU Corp. believes the claims against TXU Corp. and its subsidiaries are without merit, and intends to vigorously defend the
lawsuits. TXU Corp. is, however, unable to estimate any possible loss or predict the outcome of these actions.



On July 7, 2003, a lawsuit was filed by Texas Commercial Energy (TCE) in the United States District Court for the Southern District of Texas, Corpus
Christi Division, against TXU Energy Holdings and certain of its subsidiaries, as well as various other wholesale market participants doing business in ERCOT, claiming generally that defendants engaged in market manipulation, in violation of
antitrust and other laws, primarily during the period of extreme weather conditions in late February 2003. An amended complaint was filed in February 2004 that joined additional, unaffiliated defendants. Three retail electric providers filed motions
for leave to intervene in the action alleging claims substantially identical to TCEs. In addition, approximately 25 purported former customers of TCE filed a motion to intervene in the action alleging claims substantially



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##### Table of Contents

identical to TCEs, both on their own behalf and on behalf of a putative class of all former customers of TCE. An
order granting TXU Energy Holdings Motion to Dismiss based on the filed rate doctrine was entered on June 24, 2004. TCE has appealed the dismissal; however, TXU Corp. believes the dismissal of the antitrust claims was proper and that it has
not committed any violation of the antitrust laws. The appeal remains pending before the Fifth Circuit Court of Appeals and is set for oral argument on May 10, 2005. Further, the Commissions investigation of the market conditions in late
February 2003 has not resulted in any finding adverse to TXU Corp. Accordingly, TXU Corp. believes that TCEs and the intervenors claims are without merit, and intends to vigorously defend the lawsuit on appeal. TXU Corp. is, however,
unable to estimate any possible loss or predict the outcome of this action.



On April 28, 2003, a lawsuit was filed by a former employee of TXU Portfolio Management in the United States District Court for the Northern District of Texas, Dallas Division, against TXU Corp., TXU Energy Holdings
and TXU Portfolio Management. The case is set for trial on June 6, 2005 and discovery in the case is substantially complete. In the case, the plaintiff asserts claims under Section 806 of Sarbanes-Oxley arising from the termination of
plaintiffs employment and claims for breach of contract relating to payment of certain bonuses. Plaintiff seeks back pay, payment of bonuses and alternatively, reinstatement or future compensation, including bonuses. TXU Corp. believes the
plaintiffs claims are without merit. The plaintiff was terminated as the result of a reduction in force, not as a reaction to any concerns the plaintiff had expressed, and plaintiff was not in a position to evaluate TXU Corp.s financial
statements or assess the adequacy of TXU Corp.s financial disclosures. Thus, TXU Corp. does not believe that there is any merit to the plaintiffs claims under Sarbanes-Oxley. TXU Corp. disputes the plaintiffs claims and intends to
vigorously defend the litigation. TXU Corp. is, however, unable to estimate any possible loss or predict the outcome of this action.



On March 10, 2003, a lawsuit was filed by Kimberly P. Killebrew in the United States District Court for the Eastern District of Texas, Lufkin Division,
against TXU Corp. and TXU Portfolio Management, asserting generally that defendants engaged in manipulation of the wholesale electric market, in violation of antitrust and other laws. This case was transferred to the Beaumont Division of the Eastern
District of Texas and on March 24, 2004 was transferred to the Northern District of Texas, Dallas Division. This action is brought by an individual, alleging to be a retail consumer of electricity, on behalf of herself and as a proposed
representative of a putative class of retail purchasers of electricity that are similarly situated. Defendants have filed a motion to dismiss the lawsuit which is pending before the court; however, as a result of the dismissal of the antitrust
claims in the litigation described above brought by TCE, the parties have agreed to stay this litigation until the appeal in the TCE case has been decided. TXU Corp. believes that the plaintiff lacks standing to assert any antitrust claims and that
defendants have not violated antitrust laws or other laws as claimed by plaintiff. Therefore, TXU Corp. believes that plaintiffs claims are without merit and plans to vigorously defend the lawsuit. TXU Corp. is, however, unable to estimate any
possible loss or predict the outcome of this action.



In
November 2002 and February and March 2003, three lawsuits were filed in the United States District Court for the Northern District of Texas asserting claims under ERISA on behalf of a putative class of participants in and beneficiaries of various
employee benefit plans of TXU Corp. These ERISA lawsuits have been consolidated, and a consolidated complaint was filed in February 2004 against TXU Corp., the directors of TXU Corp. serving during the putative class period as well as members of the
TXU Thrift Plan Committee comprised of Peter B. Tinkam, Kirk R. Oliver, Biggs C. Porter, Diane J. Kubin, Barbara B. Curry and Richard Wistrand. The plaintiffs seek to represent a class of participants in such employee benefit plans during period
between April 26, 2001 and October 11, 2002. On February 10, 2004, the plaintiffs filed their motion for and memorandum in support of class certification. After class certification discovery was completed, the Court denied Plaintiffs initial
class certification motion without prejudice and granted plaintiffs leave to amend their complaint. Plaintiffs second class certification motion remains pending and TXU Corp. and the individual defendants oppose class certification and
the parties have jointly requested that the court defer ruling on the class certification motion in light of a pending appeal in a case raising similar issues that is currently pending before the Fifth Circuit Court of Appeals. TXU Corp. believes
the claims are without merit and intends to vigorously defend the lawsuit. TXU Corp. is, however, unable to estimate any possible loss or predict the outcome of this action.



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On October 23, 2002, a derivative lawsuit was filed by a purported shareholder on behalf of TXU Corp. in
the 116th Judicial District Court of Dallas County, Texas, against TXU Corp., Erle Nye, Michael J. McNally, David W. Biegler, J.S. Farrington, William M. Griffin, Kerney Laday, Jack E. Little, Margaret M. Maxey, J.E. Oesterreicher, Charles R. Perry
and Herbert H. Richardson. The plaintiff alleges breach of fiduciary duty, abuse of control, mismanagement, waste of corporate assets, and breach of duties of loyalty and good faith. The named individual defendants are current or former officers
and/or directors of TXU Corp. No amount of damages has been specified. The plaintiffs in such suit have failed to make a demand upon the directors as is required by law, and the case was stayed. The plaintiff filed a motion seeking to lift the stay
which was granted in part solely to refer the case to mediation. The defendants have filed pleadings seeking to have the case dismissed if the stay is lifted due to plaintiffs failure to make the statutorily required pre-suit demand and the
Court has yet to rule on the requested dismissal.



In
October, November, and December 2002 and January 2003, a number of lawsuits were filed in, removed to or transferred to the United States District Court for the Northern District of Texas against TXU Corp. and certain of its officers. These lawsuits
have been consolidated and lead plaintiffs have been appointed by the Court. The complaint alleged violations of the provisions of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, as amended, and Rule 10b-5 promulgated
thereunder, and Section 11 and 12 of the Securities Act of 1933, as amended, relating to alleged materially false and misleading statements, including statements in prospectuses related to the offering by TXU Corp. of its equity-linked debt
securities and common stock in May and June 2002. On July 21, 2003, the lead plaintiffs filed an amended consolidated complaint against Erle Nye, Michael J. McNally, V.J. Horgan, and Brian N. Dickie and directors Derek C. Bonham, J.S. Farrington,
William M. Griffin, Kerney Laday, Jack E. Little, Margaret M. Maxey, J.E. Oesterreicher, Herbert H. Richardson and Charles R. Perry, as defendants. On January 20, 2005, TXU Corp. executed a memorandum of understanding pursuant to which TXU Corp.
would (i) make a one-time payment of $150 million, of which $101 million has now been pledged by insurance carriers, (ii) make certain corporate governance changes, including heightened independence standards for directors, (iii) deny any liability
in connection with the lawsuits, (iv) and be released from any claims or liabilities thereafter. TXU Corp. may receive additional amounts from insurance carriers, which would reduce the financial impact of the settlement to TXU Corp. During March
2005, the one time payment of $150 million was made to the plaintiff shareholders and $66 million of the $101 million pledged by insurance carriers was received by TXU Corp. A final settlement stipulation has been signed and filed with the Court and
the Court entered an order April 11, 2005 granting preliminary approval of the settlement, conditionally certifying a class for purposes of the settlement and providing for notice to the class members. The Court has scheduled a hearing on June 23,
2005 to consider final approval of the settlement.



Other Contingencies In October 2003, the former directors and officers of TXU Europe Limited and subsidiaries that are now in administration (collectively TXU Europe), who include current and former officers of TXU
Corp. and subsidiary companies, received notices from certain creditors and the administrators of TXU Europe of various claims or potential claims related to losses incurred by creditors, including claims for alleged omissions from a securities
offering document and alleged breaches by directors of their English law duties as directors of these companies in failing to minimize the potential losses to the creditors of TXU Europe. On January 27, 2005, TXU Corp. executed a comprehensive
agreement resolving potential claims against TXU Corp. relating to TXU Europe. Pursuant to the agreement, TXU Corp. will make a $220 million one-time payment ($143 million after-tax), a substantial portion of which may be recovered from insurance
carriers, denies any liability, and is released from all such claims. The settlement agreement was contingent in part upon creditor approval of the bankruptcy scheme presented by the administrators (CVAs). While such approval has been received, two
creditor groups subsequently filed an application in UK court objecting to the CVAs. TXU Corp. expects that these objections will be resolved by the administrators but that completion of the settlement agreement will be delayed until the third or
fourth quarter of 2005. The payment is expected to be sourced from working capital, credit facility capacity and insurance proceeds should agreements be reached with carriers.



General In addition to the above, TXU Corp. is involved in various other legal and administrative
proceedings in the normal course of business the ultimate resolution of which, in the opinion of management, should not have a material effect upon its financial position, results of operations or cash flows.



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##### Table of Contents

7. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS



Net pension and other postretirement benefit costs recognized during the
three months ended March 31, 2005 and 2004 are comprised of the following:



|                                                      |  |                              |     |   |      |   |     |  
|----------------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                                      |  | Three Months Ended March 31, |    
|                                                      |  | 2005                         |     |   | 2004 |  
|Components of Net Pension Costs:                      |  |                              |     |   |      |   |     |  
|Service cost                                          |  | $                            | 11  |   |      | $ | 13  |  
|Interest cost                                         |  |                              | 40  |   |      |   | 34  |  
|Expected return on assets                             |  |                              | (45 | ) |      |   | (36 | )
|Amortization of unrecognized prior service cost       |  |                              | 1   |   |      |   | 1   |  
|Amortization of net loss                              |  |                              | 5   |   |      |   | 4   |  
|                                                      |  |                              |     |   |      |   |     |  
|Net pension cost                                      |  | $                            | 12  |   |      | $ | 16  |  
|                                                      |  |                              |     |   |      |   |     |  
|Components of Net Other Postretirement Benefit Costs: |  |                              |     |   |      |   |     |  
|Service cost                                          |  | $                            | 3   |   |      | $ | 4   |  
|Interest cost                                         |  |                              | 14  |   |      |   | 15  |  
|Expected return on assets                             |  |                              | (4  | ) |      |   | (4  | )
|Amortization of unrecognized net transition asset     |  |                              |    |   |      |   | 1   |  
|Amortization of unrecognized prior service cost       |  |                              | (1  | ) |      |   | (1  | )
|Amortization of net loss                              |  |                              | 6   |   |      |   | 7   |  
|                                                      |  |                              |     |   |      |   |     |  
|Net other postretirement benefit cost                 |  | $                            | 18  |   |      | $ | 22  |  
|                                                      |  |                              |     |   |      |   |     |  



The discount rate
reflected in net pension and other postretirement benefit costs in 2005 is 6.0%. The expected rate of return on plan assets reflected in the 2005 cost amounts is 8.75% for the pension plan and 8.66% for other postretirement benefits.



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8. SEGMENT INFORMATION



TXU Corp.s operations are aligned into two reportable segments: TXU Energy Holdings and TXU Electric Delivery. The segments are managed
separately because they are strategic business units that offer different products or services and involve different risks.



TXU Energy Holdings  consists of electricity generation as well as consumer, business and wholesale markets activities. These operations are
effectively managed as one business through the wholesale markets function that captures the natural hedge of commodity price risk inherent between the retail and generation businesses.



TXU Electric Delivery  consists of regulated operations involving the transmission and distribution of
electricity in Texas.



Corporate and Other 
remaining nonsegment operations consisting primarily of discontinued operations, general corporate expenses and interest on debt at the TXU Corp. level.



TXU Corp. evaluates performance based on income from continuing operations. TXU Corp. accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices.



|                                                    |  |                              |       |   |      |   |       |  
|--------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                    |  | Three Months Ended March 31, |      
|                                                    |  | 2005                         |       |   | 2004 |  
|Operating revenues:                                 |  |                              |       |   |      |   |       |  
|TXU Energy Holdings                                 |  | $                            | 1,803 |   |      | $ | 1,957 |  
|TXU Electric Delivery                               |  |                              | 550   |   |      |   | 523   |  
|Corporate and other                                 |  |                              | 6     |   |      |   | 5     |  
|Eliminations                                        |  |                              | (319  | ) |      |   | (353  | )
|                                                    |  |                              |       |   |      |   |       |  
|Consolidated                                        |  | $                            | 2,040 |   |      | $ | 2,132 |  
|                                                    |  |                              |       |   |      |   |       |  
|Regulated revenues included in operating revenues:  |  |                              |       |   |      |   |       |  
|TXU Energy Holdings                                 |  | $                            |      |   |      | $ |      |  
|TXU Electric Delivery                               |  |                              | 550   |   |      |   | 523   |  
|Corporate and other                                 |  |                              |      |   |      |   |      |  
|Eliminations                                        |  |                              | (311  | ) |      |   | (349  | )
|                                                    |  |                              |       |   |      |   |       |  
|Consolidated                                        |  | $                            | 239   |   |      | $ | 174   |  
|                                                    |  |                              |       |   |      |   |       |  
|Affiliated revenues included in operating revenues: |  |                              |       |   |      |   |       |  
|TXU Energy Holdings                                 |  | $                            | 2     |   |      | $ |      |  
|TXU Electric Delivery                               |  |                              | 311   |   |      |   | 349   |  
|Corporate and other                                 |  |                              | 6     |   |      |   | 4     |  
|Eliminations                                        |  |                              | (319  | ) |      |   | (353  | )
|                                                    |  |                              |       |   |      |   |       |  
|Consolidated                                        |  | $                            |      |   |      | $ |      |  
|                                                    |  |                              |       |   |      |   |       |  
|Income (loss) from continuing operations:           |  |                              |       |   |      |   |       |  
|TXU Energy Holdings                                 |  | $                            | 203   |   |      | $ | 116   |  
|TXU Electric Delivery                               |  |                              | 71    |   |      |   | 66    |  
|Corporate and other                                 |  |                              | 132   |   |      |   | (54   | )
|                                                    |  |                              |       |   |      |   |       |  
|Consolidated                                        |  | $                            | 406   |   |      | $ | 128   |  
|                                                    |  |                              |       |   |      |   |       |  



No customer provided
more than 10% of consolidated revenues.



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9. DERIVATIVES AND HEDGES



As of March 31, 2005, it is expected that $55 million of after-tax net losses accumulated in other comprehensive income will
be reclassified into earnings during the next twelve months. This amount primarily represents amortization of dedesignated hedge losses as the hedged transactions are settled. Of this amount, $44 million relates to commodity hedges and $11 million
relates to financing-related hedges.



TXU Corp. experienced net
hedge ineffectiveness of $1 million, reported as a gain in revenues, for the three months ended March 31, 2005. For the three months ended March 31, 2004, TXU Corp. experienced net hedge ineffectiveness of $12 million, reported as a loss in
revenues.



The net effect of unrealized mark-to-market
ineffectiveness accounting (versus settlement accounting), which includes the above amounts as well as the effect of reversing unrealized gains and losses recorded in previous periods to offset realized gains and losses in the current period,
totaled $3 million in net gains for the three months ended March 31, 2005 and $15 million in net losses for the three months ended March 31, 2004.



10. SUPPLEMENTARY FINANCIAL INFORMATION



Regulated Versus Unregulated Operations 



|                                                           |  |                              |       |   |      |   |       |  
|---------------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                           |  | Three Months Ended March 31, |      
|                                                           |  | 2005                         |       |   | 2004 |  
|Operating revenues:                                        |  |                              |       |   |      |   |       |  
|Regulated                                                  |  | $                            | 550   |   |      | $ | 523   |  
|Unregulated                                                |  |                              | 1,809 |   |      |   | 1,962 |  
|Intercompany sales eliminations  regulated                |  |                              | (311  | ) |      |   | (349  | )
|Intercompany sales eliminations  unregulated              |  |                              | (8    | ) |      |   | (4    | )
|                                                           |  |                              |       |   |      |   |       |  
|Total operating revenues                                   |  |                              | 2,040 |   |      |   | 2,132 |  
|Costs and operating expenses:                              |  |                              |       |   |      |   |       |  
|Cost of energy sold and delivery fees  unregulated*       |  |                              | 744   |   |      |   | 906   |  
|Operating costs  regulated                                |  |                              | 181   |   |      |   | 175   |  
|Operating costs  unregulated                              |  |                              | 152   |   |      |   | 168   |  
|Depreciation and amortization  regulated                  |  |                              | 105   |   |      |   | 87    |  
|Depreciation and amortization  unregulated                |  |                              | 82    |   |      |   | 103   |  
|Selling, general and administrative expenses  regulated   |  |                              | 49    |   |      |   | 49    |  
|Selling, general and administrative expenses  unregulated |  |                              | 134   |   |      |   | 180   |  
|Franchise and revenue-based taxes  regulated              |  |                              | 57    |   |      |   | 59    |  
|Franchise and revenue-based taxes  unregulated            |  |                              | 28    |   |      |   | 26    |  
|Other income                                               |  |                              | (51   | ) |      |   | (9    | )
|Other deductions                                           |  |                              | 3     |   |      |   | 19    |  
|Interest income                                            |  |                              | (19   | ) |      |   | (4    | )
|Interest expense and related charges                       |  |                              | 195   |   |      |   | 184   |  
|                                                           |  |                              |       |   |      |   |       |  
|Total costs and expenses                                   |  |                              | 1,660 |   |      |   | 1,943 |  
|                                                           |  |                              |       |   |      |   |       |  
|Income from continuing operations before income taxes      |  | $                            | 380   |   |      | $ | 189   |  
|                                                           |  |                              |       |   |      |   |       |  

---

|* | Includes cost of fuel consumed of $159 million and $221 million for the three months ended March 31, 2005 and 2004, respectively. The balance in each period represents energy
purchased for resale and delivery fees.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
operations of the TXU Energy Holdings segment are included above as unregulated, as the Texas market is now open to competition. However, retail pricing to residential customers in the historical service territory continues to be subject to certain
price controls.



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##### Table of Contents

Other Income and Deductions 



|                                                               |  |                              |     |   |      |   |   
|-------------------------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | --
|                                                               |  | Three Months Ended March 31,
|                                                               |  | 2005                         |     |   | 2004
|Other income:                                                  |  |                              |     |   |      |   |   
|Insurance recovery of litigation settlement (a)                |  | $                            | 35  |   |      | $ |  
|Net gain on sale of businesses and other properties            |  |                              | 13  |   |      |   | 1 
|Equity portion of allowance for funds used during construction |  |                              |    |   |      |   | 1 
|Equity in income of unconsolidated entities                    |  |                              |    |   |      |   | 1 
|Other                                                          |  |                              | 3   |   |      |   | 6 
|                                                               |  |                              |     |   |      |   |   
|Total other income                                             |  | $                            | 51  |   |      | $ | 9 
|                                                               |  |                              |     |   |      |   |   
|Other deductions:                                              |  |                              |     |   |      |   |   
|Charge related to coal contract counterparty nonperformance    |  |                              | 12  |   |      |   |  
|Capgemini outsourcing transition costs                         |  |                              | 5   |   |      |   |  
|Employee severance and asset writedowns                        |  |                              | (1  | ) |      |   | 17
|Decrease in lease liability (b)                                |  |                              | (15 | ) |      |   |  
|Other                                                          |  |                              | 2   |   |      |   | 2 
|                                                               |  |                              |     |   |      |   |   
|Total other deductions                                         |  | $                            | 3   |   |      | $ | 19
|                                                               |  |                              |     |   |      |   |   

---

|(a) | In April 2005, TXU Corp. reached agreement with an insurance carrier regarding recoveries to be received related to the consolidated amended securities class action lawsuit
initially filed in October 2002 and settled in January 2005, and for which a charge was recorded in 2004 and reported in other deductions.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | In December 2004, TXU Corp. committed to immediately cease operating for its own benefit nine leased gas-fired combustion turbines, and recorded a charge of $157 million reported in
other deductions. The charge represented the present value of the future lease payments related to the turbines, net of estimated sublease proceeds. An adjustment of $15 million was recorded in the first quarter of 2005 to reflect indicative
sublease bids received that exceeded the originally estimated sublease proceeds.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Severance Liability Related to Restructuring Activities 



|                                                    |  |                     |     |   |                       |   |    |               |  |   |       |   |  |   |     |  
|--------------------------------------------------- |  | ------------------- | --- | - | --------------------- | - | -- | ------------- |  | - | ----- | - |  | - | --- | -
|                                                    |  | TXU Energy Holdings |     |   | TXU Electric Delivery |   |    | Corp. & Other |  |   | Total |  
|Liability for severance costs as of January 1, 2005 |  | $                   | 42  |   |                       | $ | 12 |               |  | $ | 1     |   |  | $ | 55  |  
|Additions to liability                              |  |                     | 1   |   |                       |   |   |               |  |   |      |   |  |   | 1   |  
|Payments charged against liability                  |  |                     | (10 | ) |                       |   | (3 | )             |  |   | (1    | ) |  |   | (14 | )
|Other adjustments to the liability                  |  |                     | (3  | ) |                       |   |   |               |  |   |      |   |  |   | (3  | )
|                                                    |  |                     |     |   |                       |   |    |               |  |   |       |   |  |   |     |  
|Liability for severance costs as of March 31, 2005  |  | $                   | 30  |   |                       | $ | 9  |               |  | $ |      |   |  | $ | 39  |  
|                                                    |  |                     |     |   |                       |   |    |               |  |   |       |   |  |   |     |  



Interest Expense
and Related Charges 



|                                                                                                      |  |                              |     |   |      |   |     |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                                                                                      |  | Three Months Ended March 31, |    
|                                                                                                      |  | 2005                         |     |   | 2004 |  
|Interest                                                                                              |  | $                            | 192 |   |      | $ | 154 |  
|Distributions on exchangeable preferred membership interests of TXU Energy Holdings (a)               |  |                              |    |   |      |   | 17  |  
|Interest on long-term debt held by subsidiary trust                                                   |  |                              |    |   |      |   | 8   |  
|Amortization of debt discounts, premiums and issuance cost                                            |  |                              | 7   |   |      |   | 8   |  
|Capitalized interest, including debt portion of allowance for borrowed funds used during construction |  |                              | (4  | ) |      |   | (3  | )
|                                                                                                      |  |                              |     |   |      |   |     |  
|Total interest expense and related charges                                                            |  | $                            | 195 |   |      | $ | 184 |  
|                                                                                                      |  |                              |     |   |      |   |     |  

---

|(a) | In April 2004, TXU Corp. purchased from the holders TXU Energy Holdings preferred membership interests, and subsequent to this purchase, TXU Energy Holdings has paid
distributions on the preferred membership interest to TXU Corp.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Regulatory Assets and Liabilities 



|                                                                     |  |                |       |                   |   |      
|-------------------------------------------------------------------- |  | -------------- | ----- | ----------------- | - | -----
|                                                                     |  | March 31, 2005 |       | December 31, 2004
|Regulatory Assets:                                                   |  |                |       |                   |   |      
|Generation-related regulatory assets securitized by transition bonds |  | $              | 1,572 |                   | $ | 1,607
|Securities reacquisition costs                                       |  |                | 124   |                   |   | 125  
|Recoverable deferred income taxes  net                              |  |                | 114   |                   |   | 109  
|Nuclear decommissioning asset                                        |  |                | 41    |                   |   | 30   
|Other regulatory assets                                              |  |                | 123   |                   |   | 123  
|                                                                     |  |                |       |                   |   |      
|Total regulatory assets                                              |  |                | 1,974 |                   |   | 1,994
|                                                                     |  |               
|Regulatory Liabilities:                                              |  |                |       |                   |   |      
|Investment tax credit and protected excess deferred taxes            |  |                | 77    |                   |   | 79   
|Over-collection of securitization (transition) bond revenues         |  |                | 20    |                   |   | 23   
|Other regulatory liabilities                                         |  |                | 1     |                   |   | 1    
|                                                                     |  |                |       |                   |   |      
|Total regulatory liabilities                                         |  |                | 98    |                   |   | 103  
|                                                                     |  |                |       |                   |   |      
|Net regulatory assets                                                |  | $              | 1,876 |                   | $ | 1,891
|                                                                     |  |                |       |                   |   |      



Included in net
regulatory assets are assets of $121 million at both March 31, 2005 and December 31, 2004 that are earning a return. The regulatory assets, other than those subject to securitization, have a remaining recovery period of 12 to 46 years.



Restricted Cash 



|                                                                                                |  |                                                |    |            |   |   
|----------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | -- | ---------- | - | --
|                                                                                                |  | Balance Sheet Classification At March 31, 2005
|                                                                                                |  | Current Assets                                 |    | Investment
|Customer collections related to securitization bonds used only to service debt and pay expenses |  | $                                              | 46 |            | $ |  
|Payment of fees associated with securitization bonds                                            |  |                                                |   |            |   | 10
|Reserve for shortfalls of transition bond charges                                               |  |                                                |   |            |   | 3 
|Collateral for letters of credit                                                                |  |                                                |   |            |   | 4 
|Demolition and relocation work to be performed by TXU Corp. related to the sale of land         |  |                                                | 6  |            |   | 15
|                                                                                                |  |                                                |    |            |   |   
|Total                                                                                           |  | $                                              | 52 |            | $ | 32
|                                                                                                |  |                                                |    |            |   |   



Accounts
Receivable  At March 31, 2005 and December 31, 2004, accounts receivable of $873 million and $1.3 billion, respectively, are stated net of allowance for uncollectible accounts of $34 million and $16 million, respectively. During the
three months ended March 31, 2005, bad debt expense was $11 million, account write-offs were $7 million and changes related to receivables sold increased the allowance for uncollectible accounts by $14 million. During the three months ended March
31, 2004, bad debt expense was $26 million, account write-offs were $25 million and other activity decreased the allowance for uncollectible accounts by $8 million. Allowances related to receivables sold are reported in other current liabilities and
totaled $33 million and $47 million at March 31, 2005 and December 31, 2004, respectively.



Accounts receivable included $328 million and $422 million of unbilled revenues at March 31, 2005 and December 31, 2004, respectively.



Commodity Contracts  At March 31, 2005 and December 31, 2004, current and noncurrent commodity contract
assets, arising principally from mark-to-market accounting, totaled $1.4 billion and $861 million, respectively, and are stated net of applicable credit (collection) and performance reserves totaling $24 million and $15 million, respectively.
Performance reserves are provided for direct, incremental costs to settle the contracts.



24



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##### Table of Contents

Intangible Assets Intangible assets other than goodwill are comprised of the
following:



|                                                                                     |  |                      |     |                         |   |     |  |                     |     |                         |   |     |  |   |     |  |   |    
|------------------------------------------------------------------------------------ |  | -------------------- | --- | ----------------------- | - | --- |  | ------------------- | --- | ----------------------- | - | --- |  | - | --- |  | - | ---
|                                                                                     |  | As of March 31, 2005 |     | As of December 31, 2004
|                                                                                     |  | GrossCarryingAmount  |     | AccumulatedAmortization |   | Net |  | GrossCarryingAmount |     | AccumulatedAmortization |   | Net
|Intangible assets subject to amortization included in property, plant and equipment: |  |                      |     |                         |   |     |  |                     |     |                         |   |     |  |   |     |  |   |    
|Capitalized software placed in service                                               |  | $                    | 364 |                         | $ | 299 |  | $                   | 65  |                         | $ | 364 |  | $ | 294 |  | $ | 70 
|Land easements                                                                       |  |                      | 174 |                         |   | 61  |  |                     | 113 |                         |   | 173 |  |   | 61  |  |   | 112
|Mineral rights and other                                                             |  |                      | 31  |                         |   | 23  |  |                     | 8   |                         |   | 31  |  |   | 23  |  |   | 8  
|                                                                                     |  |                      |     |                         |   |     |  |                     |     |                         |   |     |  |   |     |  |   |    
|Total                                                                                |  | $                    | 569 |                         | $ | 383 |  | $                   | 186 |                         | $ | 568 |  | $ | 378 |  | $ | 190
|                                                                                     |  |                      |     |                         |   |     |  |                     |     |                         |   |     |  |   |     |  |   |    



Aggregate TXU Corp.
amortization expense for intangible assets for the three months ended March 31, 2005 and 2004 was $6 million and $26 million, respectively. At March 31, 2005, the weighted average useful lives of capitalized software, land easements and mineral
rights and other were 5 years, 69 years and 40 years, respectively.



The estimated aggregate amortization expense for each of the five succeeding fiscal years from December 31, 2004 is as follows:



|     |  |        |   
|---- |  | ------ | --
|Year |  | Amount
|2005 |  | $      | 19
|2006 |  |        | 18
|2007 |  |        | 15
|2008 |  |        | 13
|2009 |  |        | 6 



Goodwill of $542
million reported in the consolidated balance sheet as of March 31, 2005 and December 31, 2004 includes $517 million related to TXU Energy Holdings and $25 million related to TXU Electric Delivery.



Inventories by Major Category 



|                       |  |               |     |                  |   |    
|---------------------- |  | ------------- | --- | ---------------- | - | ---
|                       |  | March 31,2005 |     | December 31,2004
|Materials and supplies |  | $             | 193 |                  | $ | 169
|Fuel stock             |  |               | 76  |                  |   | 79 
|Gas stored underground |  |               | 73  |                  |   | 72 
|                       |  |               |     |                  |   |    
|Total inventories      |  | $             | 342 |                  | $ | 320
|                       |  |               |     |                  |   |    



Inventories are
carried at average costs.



Property, Plant and Equipment
 As of March 31, 2005 and December 31, 2004, property, plant and equipment of $16.8 billion and $16.7 billion, respectively, is stated net of accumulated depreciation and amortization of $11.4 billion and $11.2 billion, respectively.



As of March 31, 2005, substantially all of TXU Electric
Deliverys electric utility property, plant and equipment (with a net book value of $6.7 billion) is pledged as collateral on TXU Electric Deliverys first mortgage bonds and senior secured notes.



Asset Retirement Obligations  SFAS 143 became effective
on January 1, 2003. SFAS 143 requires entities to record the fair value of a legal liability for an asset retirement obligation in the period of its inception. For TXU Corp., such liabilities primarily relate to nuclear generation plant
decommissioning, land reclamation related to lignite mining and removal of lignite/coal-fired plant ash treatment facilities. The liability is recorded at its net present value with a corresponding increase in the carrying value of the related
long-lived asset. The liability is accreted each period, representing the time value of money, and the capitalized cost is depreciated over the remaining useful life of the related asset.



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##### Table of Contents

The asset retirement liability at March 31, 2005 was $635 million, comprised of a $631 million liability
as of December 31, 2004 and $10 million of accretion during the three months ended March 31, 2005, reduced by $6 million in reclamation payments.



With respect to nuclear decommissioning costs, accounting under SFAS 143 has no earnings impact and results in timing differences in the recognition of
asset retirement costs that are being recovered through the regulatory process.



Supplemental Cash Flow Information 



|                                                           |  |                              |     |      |   |     |  
|---------------------------------------------------------- |  | ---------------------------- | --- | ---- | - | --- | -
|                                                           |  | Three Months Ended March 31, |    
|                                                           |  | 2005                         |     | 2004 |  
|Cash payments (receipts) related to continuing operations: |  |                              |     |      |   |     |  
|Interest (net of amounts capitalized)                      |  | $                            | 150 |      | $ | 189 |  
|Income taxes                                               |  | $                            | 41  |      | $ | (1  | )
|Cash payments related to discontinued operations:          |  |                              |     |      |   |     |  
|Interest (net of amounts capitalized)                      |  | $                            |    |      | $ | 45  |  





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##### Table of Contents

|REPORT | OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|------ | ------------------------------------------------



TXU Corp.:



We have reviewed the accompanying condensed consolidated balance sheet of TXU Corp. and subsidiaries (TXU Corp.) as of March 31, 2005, and the related condensed statements of consolidated income, comprehensive income
and cash flows for the three-month periods ended March 31, 2005 and 2004. These interim financial statements are the responsibility of TXU Corp.s management.



We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with
standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should be made to
such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.



We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheet of TXU Corp. as of December 31, 2004, and the related statements of consolidated income, comprehensive income, cash flows and shareholders equity for the year then ended (not presented herein); and in our report (which includes
explanatory paragraphs related to the Companys change in method of accounting for stock based compensation with the election to early adopt Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Paymentand the
rescission of Emerging Issues Task Force Issue No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management Activities) dated March 16, 2005 we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.



/s/ DELOITTE & TOUCHE LLP



Dallas, Texas

May 9, 2005





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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



BUSINESS



TXU Corp. is a holding company conducting its operations principally through its TXU Energy Holdings and TXU Electric Delivery subsidiaries. TXU Energy
Holdings is engaged in electricity generation and retail and wholesale energy sales. TXU Electric Delivery is engaged in regulated electricity transmission and distribution operations.



TXU Corp. has two reportable segments: TXU Energy Holdings and TXU Electric Delivery. (See Note 8 to Financial Statements
for further information concerning reportable business segments.)



Discontinued Operations  The sale of the Pedricktown, New Jersey 122 MW power production facility, which is subject to regulatory approval, is expected to close no later than July 2005. Under the definitive sales
agreement, proceeds from the transaction are expected to be approximately $8.5 million.



RESULTS OF OPERATIONS



All dollar amounts in
Managements Discussion and Analysis of Financial Condition and Results of Operations and the tables therein, except per share amounts, are stated in millions of US dollars unless otherwise indicated.



The results of operations and the related managements discussion of
those results for all periods presented reflect the discontinuance of certain operations of TXU Corp. (See Note 2 to Financial Statements regarding discontinued operations.)



TXU Corp. Consolidated



Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004



Reference is made to the consolidated income statements presented in the financial statements and the comparisons of results
by business segment following the discussion of consolidated results immediately below. The business segment comparisons provide additional detail and quantification of items affecting financial results.



TXU Corp.s operating revenues decreased $92 million, or 4%, to $2.0
billion in 2005.



| |  |  | Operating revenues in the TXU Energy Holdings segment declined $154 million, or 8%, to $1.8 billion reflecting a drop in sales volumes, partially offset by higher retail and
wholesale pricing. Retail volumes declined 20% primarily reflecting loss of customers due to competitive activity, particularly in the large business market, as well as milder weather.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating revenues in the TXU Electric Delivery segment increased $27 million, or 5%, to $550 million in 2005 reflecting $19 million in transition charges associated with
securitization bonds issued in June 2004 (offset in amortization expense), as well as higher transmission and distribution fees (tariffs).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consolidated revenue growth reflected a $34 million reduction in the intercompany sales elimination, primarily reflecting lower sales by TXU Electric Delivery to TXU Energy Holdings
as sales to nonaffiliated REPs increased.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents

Gross Margin



|                                             |  |                              |       |             |     |   |      |   |             |  |     |  
|-------------------------------------------- |  | ---------------------------- | ----- | ----------- | --- | - | ---- | - | ----------- |  | --- | -
|                                             |  | Three Months Ended March 31, |      
|                                             |  | 2005                         |       | % ofRevenue |     |   | 2004 |   | % ofRevenue | 
|Operating revenues                           |  | $                            | 2,040 |             | 100 | % |      | $ | 2,132       |  | 100 | %
|Costs and expenses:                          |  |                              |       |             |     |   |      |   |             |  |     |  
|Cost of energy sold, including delivery fees |  |                              | 744   |             | 37  | % |      |   | 906         |  | 42  | %
|Operating costs                              |  |                              | 333   |             | 16  | % |      |   | 343         |  | 16  | %
|Depreciation and amortization                |  |                              | 184   |             | 9   | % |      |   | 165         |  | 8   | %
|                                             |  |                              |       |             |     |   |      |   |             |  |     |  
|Gross margin                                 |  | $                            | 779   |             | 38  | % |      | $ | 718         |  | 34  | %
|                                             |  |                              |       |             |     |   |      |   |             |  |     |  



Gross margin is
considered a key operating metric as it measures the effect of changes in sales volumes and pricing versus the variable and fixed costs to generate and deliver energy. Cost of energy sold consists of fuel and purchased power costs. Operating costs
relate directly to generation plants and the transmission and distribution system. Depreciation and amortization expense included in gross margin relates to assets that are directly used in the generation and delivery of electricity.



Gross margin increased $61 million, or 8%, to $779 million in 2005.



| |  |  | The TXU Energy Holdings segments gross margin increased $63 million, or 14%, to $517 million. Higher gross margin reflected initiatives taken to respond to higher wholesale
power prices that were driven by higher natural gas prices, including retail pricing actions and more cost effective sourcing of power. The gross margin increase reflected higher retail and wholesale prices partially offset by the effect of lower
volumes and lower results from hedging and risk management activities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A favorable effect on gross margin of lower cost of energy sold (fuel and purchased power costs) was largely offset by higher delivery fees on a per MWh basis.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of energy sold reflected the favorable effect of lower purchased power volumes (due to lower sales volumes), improved efficiency of coal/lignite-fired generation plants and
lower use of gas-fired generation, partially offset by higher per MWh cost of purchased power due to rising wholesale prices.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The TXU Electric Delivery segments gross margin decreased by $1 million to $264 million in 2005, as the effect of lower delivered volumes and higher operating costs were
largely offset by higher transmission-related tariffs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Operating costs decreased $10 million, or 3%, to $333 million in 2005. The decline primarily reflected an $8 million effect of TXU Energy Holdings no longer providing customer care support to TXU Gas customers, the operations of which were
sold in October 2004, and the absence of $4 million of costs associated with the gas transportation business sold in June 2004, partially offset by increased third-party transmission costs and higher property taxes due to normal property additions
and replacements.



Depreciation and amortization (including
amounts shown in the gross margin table above) decreased $3 million, or 2%, to $187 million in 2005. The decline primarily reflected a $22 million effect of recording the fair value of the Capgemini put option in 2004, which reduced the amortizable
carrying value of software licensed to Capgemini, partially offset by $19 million in higher amortization of the transition bond regulatory asset.



SG&A expense decreased $46 million, or 20%, to $183 million in 2005. The decline reflected $19 million in net lower shared services costs including
the effects of the Capgemini agreement, $15 million in lower bad debt expense and a nonrecurring $14 million compensation expense in 2004 related to an executive employment agreement. SG&A expense in 2005 included $4 million in consulting
expenses related to the business restructuring actions that commenced in 2004.



29



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##### Table of Contents

Other income increased by $42 million to $51 million in 2005. The 2005 amount includes a $35 million
credit arising from additional insurance proceeds agreed upon with a carrier related to the settlement of the consolidated amended securities class action lawsuit and $12 million of amortization of the deferred gain on the sale of the gas
transportation business. The 2004 amount reflects several individually insignificant items.



Other deductions decreased $16 million to $3 million in 2005. The 2005 amount included a $12 million charge related to the nonperformance of a counterparty in connection with a trading coal contract and $5 million in
transition expenses associated with the Capgemini outsourcing agreement. The 2005 amount also includes a $15 million credit arising from a change in estimated sublease proceeds, due to the receipt of indicative bids in the quarter, reflected in the
net liability recorded in 2004 related to leased gas-fired combustion turbines no longer in service. As the original charge associated with this liability was recorded in this line item, the related credit is being similarly reported. The 2004
amount included $17 million for employee severance and asset writedowns related to the 2004 restructuring actions.



Interest income increased $15 million to $19 million in 2005 primarily reflecting losses on interest rate swaps in 2004 and higher interest earned on
short-term investments in 2005.



Interest expense and related
charges increased $11 million, or 6%, to $195 million in 2005 reflecting a $15 million increase due to higher average borrowings, partially offset by a $4 million decrease due to lower average interest rates.



An income tax benefit of $26 million in 2005 reflects recognition of $138
million in additional tax benefit related to the 2002 TXU Europe worthlessness deduction. The additional tax benefit in the quarter reflects identification of tax planning strategies TXU Corp. would implement to ensure utilization of capital losses
associated with the write-off of the investment in TXU Europe. Excluding this tax benefit, the effective income tax rate on results from continuing operations was 29.5% in 2005 compared to 32.3% in the 2004 quarter. The decrease in the effective
rate primarily reflected nondeductible executive compensation in the 2004 period.



Income from continuing operations (an after-tax measure) increased $278 million to $406 million in 2005.



| |  |  | Results from corporate and other activities increased $186 million reflecting $138 million in additional tax benefit related to TXU Europe, $23 million after-tax in additional
insurance recovery related to the securities litigation settlement, the executive compensation charge of $14 million (pre and after-tax) in 2004 and $8 million after-tax in 2005 in amortization of the deferred gain on the June 2004 sale of TXU Fuel.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Earnings in the TXU Energy Holdings segment increased $87 million driven by improved gross margin and lower SG&A expenses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Earnings in the TXU Electric Delivery segment rose $5 million primarily reflecting lower net interest expense.
| | - |  | --------------------------------------------------------------------------------------------------------------



Net pension and postretirement benefit costs reduced income from continuing
operations by $14 million after-tax in 2005 and $18 million in 2004.



Income from discontinued operations (an after-tax measure) totaled $15 million in 2005 and $50 million in 2004. The 2005 amount primarily represents a $14 million reduction in the estimated loss on the TXU Gas merger transaction due
primarily to favorable resolution of a proposed working capital adjustment to the sales price. The 2004 amount primarily reflects the normal operations of TXU Gas, TXU Australia and the telecommunications business prior to sale.



Diluted results per share of common stock were a net loss of $0.19 in 2005
compared to net income of $0.49 in 2004.



| |  |  | The 2005 diluted per share results reflect a $1.94 per share negative impact associated with the November 2004 accelerated share repurchase program, which has not
yet been settled. Because TXU
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



30



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##### Table of Contents

Corp. intends to settle in cash the difference between the initial price of the shares and the actual costs of the shares purchased and yet to be purchased
by the counterparty under the program (the true-up), accounting rules require that earnings used in the diluted earnings per share calculation be reduced by the change in the fair value of the true-up liability in the quarter, which has been
estimated to be $462 million (without tax benefit).



| |  |  | The comparison of diluted net income per share benefited from a $0.07 per share impact of 142 million fewer average shares outstanding. Basic average common shares outstanding
decreased 26% to 238 million shares reflecting the repurchase of 20 million shares in an accelerated repurchase program in June 2004 and the repurchase of 52.5 million shares in an accelerated repurchase program in November 2004. Diluted average
common shares decreased 37% to 238 million shares reflecting the accelerated repurchase program transactions and the absence of the dilutive impact of 57 million shares issuable under the exchangeable preferred membership interests repurchased in
April 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Energy-Related Commodity Contracts and
Mark-to-Market Activities



The table below summarizes the
changes in commodity contract assets and liabilities for the three months ended March 31, 2005. The net changes in these assets and liabilities, excluding other activity as described below, represent the net effect of recording
unrealized gains/(losses) under mark-to-market accounting for positions in the commodity contract portfolio. These positions consist largely of economic hedge transactions, with speculative trading representing a small fraction of the activity.



|                                                                        |  |                                   |     |  
|----------------------------------------------------------------------- |  | --------------------------------- | --- | -
|                                                                        |  | Three Months Ended March 31, 2005 |    
|Balance of net commodity contract assets at beginning of period         |  | $                                 | 23  |  
|Settlements of positions included in the opening balance (1)            |  |                                   | (9  | )
|Unrealized mark-to-market valuations of positions held at end of period |  |                                   | (18 | )
|Other activity (2)                                                      |  |                                   | 109 |  
|                                                                        |  |                                   |     |  
|Balance of net commodity contract assets at end of period               |  | $                                 | 105 |  
|                                                                        |  |                                   |     |  

---

|(1) | Represents unrealized mark-to-market valuations of these positions recognized in earnings as of the beginning of the period.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(2) | These activities have no effect on unrealized mark-to-market valuations. Includes initial values of positions involving the receipt or payment of cash or other consideration,
including $114 million related to natural gas physical swap transactions, as well as option premiums and related amortization. Also includes a $12 million charge related to nonperformance by a coal contract counterparty.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



31



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##### Table of Contents

In addition to the net effect of recording unrealized mark-to-market gains and losses that are reflected
in changes in commodity contract assets and liabilities, similar effects arise in the recording of unrealized ineffectiveness mark-to-market gains and losses associated with commodity-related cash flow hedges. These effects are reflected in the
balance sheet as changes in cash flow hedge and other derivative assets and liabilities. The total net effect of recording unrealized gains and losses under mark-to-market accounting is summarized as follows:



|                                                                               |  |                              |     |   |      |   |     |  
|------------------------------------------------------------------------------ |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                                                               |  | Three Months Ended March 31, |    
|                                                                               |  | 2005                         |     |   | 2004 |  
|Net unrealized losses in mark-to-market commodity contract portfolio           |  | $                            | (27 | ) |      | $ | (3  | )
|Net ineffectiveness gains/(losses) related to cash flow hedges                 |  |                              | 3   |   |      |   | (15 | )
|                                                                               |  |                              |     |   |      |   |     |  
|Total net unrealized losses associated with energy-related commodity contracts |  | $                            | (24 | ) |      | $ | (18 | )
|                                                                               |  |                              |     |   |      |   |     |  



These amounts are
included in the hedging and risk management activities component of revenues as presented in the TXU Energy Holdings segment data.



Maturity Table  Of the net commodity contract asset balance above at March 31, 2005, the amount representing unrealized mark-to-market
net losses that have been recognized in current and prior years earnings is $16 million. The offsetting net asset of $121 million included in the March 31, 2005 balance sheet is comprised principally of amounts representing current and prior
years net payments of cash or other consideration, including option premiums, net of amortization, and natural gas physical swap transactions. The following table presents the unrealized mark-to-market balance at March 31, 2005, scheduled by
contractual settlement dates of the underlying positions.



|                                          |  |                                                                           |     |   |                       |   |      |                       |  |   |                               |    |  |       |    |   |  |   |      |  
|----------------------------------------- |  | ------------------------------------------------------------------------- | --- | - | --------------------- | - | ---- | --------------------- |  | - | ----------------------------- | -- |  | ----- | -- | - |  | - | ---- | -
|                                          |  | Maturity dates of unrealized net mark-to-market balances atMarch 31, 2005 |    
|Source of fair value                      |  | Maturity lessthan 1 year                                                  |     |   | Maturity of 1-3 years |   |      | Maturity of 4-5 years |  |   | Maturity in Excess of 5 years |    |  | Total |   
|Prices actively quoted                    |  | $                                                                         | 29  |   |                       | $ | 47   |                       |  | $ |                              |    |  | $     |   |   |  | $ | 76   |  
|Prices provided by other external sources |  |                                                                           | (87 | ) |                       |   | (17  | )                     |  |   | 5                             |    |  |       | (3 | ) |  |   | (102 | )
|Prices based on models                    |  |                                                                           | 10  |   |                       |   |     |                       |  |   |                              |    |  |       |   |   |  |   | 10   |  
|                                          |  |                                                                           |     |   |                       |   |      |                       |  |   |                               |    |  |       |    |   |  |   |      |  
|Total                                     |  | $                                                                         | (48 | ) |                       | $ | 30   |                       |  | $ | 5                             |    |  | $     | (3 | ) |  | $ | (16  | )
|                                          |  |                                                                           |     |   |                       |   |      |                       |  |   |                               |    |  |       |    |   |  |   |      |  
|Percentage of total fair value            |  |                                                                           | 300 | % |                       |   | (188 | )%                    |  |   | (31                           | )% |  |       | 19 | % |  |   | 100  | %



As the above table
indicates, 112% of the net unrealized mark-to-market valuations at March 31, 2005 mature within three years. This is reflective of the terms of the positions and the methodologies employed in valuing positions for periods where there is less market
liquidity and visibility. The prices actively quoted category reflects only exchange traded contracts with active quotes available. The prices provided by other external sources category represents forward commodity positions
at locations for which over-the-counter broker quotes are available. Over-the-counter quotes for power and natural gas generally extend through 2006 and 2010, respectively. The prices based on models category contains the value of all
nonexchange traded options, valued using industry accepted option pricing models. In addition, this category contains other contractual arrangements which may have both forward and option components. In many instances, these contracts can be broken
down into their component parts and modeled as simple forwards and options based on prices actively quoted. As the modeled value is ultimately the result of a combination of prices from two or more different instruments, it has been included in this
category.





32



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TXU Energy Holdings



Financial Results



|                                                      |  |                              |       |   |      |   |       |  
|----------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                      |  | Three Months Ended March 31, |      
|                                                      |  | 2005                         |       |   | 2004 |  
|Operating revenues                                    |  | $                            | 1,803 |   |      | $ | 1,957 |  
|                                                      |  |                              |       |   |      |   |       |  
|Costs and expenses:                                   |  |                              |       |   |      |   |       |  
|Cost of energy sold and delivery fees                 |  |                              | 1,056 |   |      |   | 1,254 |  
|Operating costs                                       |  |                              | 152   |   |      |   | 167   |  
|Depreciation and amortization                         |  |                              | 79    |   |      |   | 97    |  
|Selling, general and administrative expenses          |  |                              | 113   |   |      |   | 148   |  
|Franchise and revenue-based taxes                     |  |                              | 26    |   |      |   | 26    |  
|Other income                                          |  |                              | (2    | ) |      |   | (1    | )
|Other deductions                                      |  |                              | 1     |   |      |   | 20    |  
|Interest income                                       |  |                              | (9    | ) |      |   | (2    | )
|Interest expense and other charges                    |  |                              | 91    |   |      |   | 79    |  
|                                                      |  |                              |       |   |      |   |       |  
|Total costs and expenses                              |  |                              | 1,507 |   |      |   | 1,788 |  
|                                                      |  |                              |       |   |      |   |       |  
|Income from continuing operations before income taxes |  |                              | 296   |   |      |   | 169   |  
|Income tax expense                                    |  |                              | 93    |   |      |   | 53    |  
|                                                      |  |                              |       |   |      |   |       |  
|Income from continuing operations                     |  | $                            | 203   |   |      | $ | 116   |  
|                                                      |  |                              |       |   |      |   |       |  





33



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##### Table of Contents

TXU Energy Holdings



Sales Volume and Customer Count Data



|                                                                   |  |                              |   |  |        |  
|------------------------------------------------------------------ |  | ---------------------------- | - |  | ------ | -
|                                                                   |  | Three Months Ended March 31, |  
|                                                                   |  | 2005                         |   |  | 2004   |  
|Sales volumes:                                                     |  |                              |   |  |        |  
|                                                                   |  |                             
|Retail electricity sales volumes (GWh):                            |  |                              |   |  |        |  
|Historical service territory:                                      |  |                              |   |  |        |  
|Residential                                                        |  | 6,317                        |   |  | 7,119  |  
|Small business (a)                                                 |  | 2,034                        |   |  | 2,533  |  
|                                                                   |  |                              |   |  |        |  
|Total historical service territory                                 |  | 8,351                        |   |  | 9,652  |  
|Other territories:                                                 |  |                              |   |  |        |  
|Residential                                                        |  | 628                          |   |  | 518    |  
|Small business (a)                                                 |  | 139                          |   |  | 61     |  
|                                                                   |  |                              |   |  |        |  
|Total other territories                                            |  | 767                          |   |  | 579    |  
|Large business and other customers                                 |  | 4,362                        |   |  | 6,709  |  
|                                                                   |  |                              |   |  |        |  
|Total retail electricity                                           |  | 13,480                       |   |  | 16,940 |  
|Wholesale electricity sales volumes                                |  | 11,480                       |   |  | 12,553 |  
|                                                                   |  |                              |   |  |        |  
|Total retail and wholesale electricity sales volumes               |  | 24,960                       |   |  | 29,493 |  
|                                                                   |  |                              |   |  |        |  
|Average volume (kWh) per retail customer (b):                      |  |                              |   |  |        |  
|                                                                   |  |                             
|Residential                                                        |  | 3,256                        |   |  | 3,452  |  
|Small business                                                     |  | 7,002                        |   |  | 8,084  |  
|Large business and other customers                                 |  | 63,906                       |   |  | 91,240 |  
|                                                                   |  |                             
|Weather (service territory average)  percent of normal (c):       |  |                              |   |  |        |  
|                                                                   |  |                             
|Percent of normal:                                                 |  |                              |   |  |        |  
|Cooling degree days                                                |  | 71.1                         | % |  | 158.4  | %
|Heating degree days                                                |  | 87.7                         | % |  | 93.1   | %
|                                                                   |  |                             
|Customer counts:                                                   |  |                              |   |  |        |  
|                                                                   |  |                             
|Retail electricity customers (end of period and in thousands) (d): |  |                              |   |  |        |  
|Historical service territory:                                      |  |                              |   |  |        |  
|Residential                                                        |  | 1,925                        |   |  | 2,054  |  
|Small business (a)                                                 |  | 299                          |   |  | 316    |  
|                                                                   |  |                              |   |  |        |  
|Total historical service territory                                 |  | 2,224                        |   |  | 2,370  |  
|                                                                   |  |                             
|Other territories:                                                 |  |                              |   |  |        |  
|Residential                                                        |  | 195                          |   |  | 163    |  
|Small business (a)                                                 |  | 7                            |   |  | 5      |  
|                                                                   |  |                              |   |  |        |  
|Total other territories                                            |  | 202                          |   |  | 168    |  
|                                                                   |  |                             
|Large business and other customers                                 |  | 61                           |   |  | 78     |  
|                                                                   |  |                              |   |  |        |  
|Total retail electricity customers                                 |  | 2,487                        |   |  | 2,616  |  
|                                                                   |  |                              |   |  |        |  

---

|(a) | Customers with demand of less than 1 MW annually.
|--- | -------------------------------------------------

|(b) | Calculated using average number of customers for period.
|--- | --------------------------------------------------------

|(c) | Weather data is obtained from Weatherbank, Inc., an independent company that collects and archives weather data from reporting stations of the National Oceanic and Atmospheric
Administration (a federal agency under the US Department of Commerce).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Based on number of meters.
|--- | --------------------------





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TXU Energy Holdings



Revenue and Market Share Data



|                                                       |  |                              |        |   |      |   |        |  
|------------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                       |  | Three Months Ended March 31, |       
|                                                       |  | 2005                         |        |   | 2004 |  
|Operating revenues (millions of dollars):              |  |                              |        |   |      |   |        |  
|                                                       |  |                             
|Retail electricity revenues:                           |  |                              |        |   |      |   |        |  
|Historical service territory:                          |  |                              |        |   |      |   |        |  
|Residential                                            |  | $                            | 636    |   |      | $ | 650    |  
|Small business (a)                                     |  |                              | 228    |   |      |   | 256    |  
|                                                       |  |                              |        |   |      |   |        |  
|Total historical service territory                     |  |                              | 864    |   |      |   | 906    |  
|                                                       |  |                             
|Other territories:                                     |  |                              |        |   |      |   |        |  
|Residential                                            |  |                              | 57     |   |      |   | 43     |  
|Small business (a)                                     |  |                              | 12     |   |      |   | 6      |  
|                                                       |  |                              |        |   |      |   |        |  
|Total other territories                                |  |                              | 69     |   |      |   | 49     |  
|                                                       |  |                             
|Large business and other customers                     |  |                              | 327    |   |      |   | 453    |  
|                                                       |  |                              |        |   |      |   |        |  
|Total retail electricity revenues                      |  |                              | 1,260  |   |      |   | 1,408  |  
|Wholesale electricity revenues                         |  |                              | 516    |   |      |   | 466    |  
|Hedging and risk management activities                 |  |                              | (53    | ) |      |   | (8     | )
|Other revenues                                         |  |                              | 80     |   |      |   | 91     |  
|                                                       |  |                              |        |   |      |   |        |  
|Total operating revenues                               |  | $                            | 1,803  |   |      | $ | 1,957  |  
|                                                       |  |                              |        |   |      |   |        |  
|Hedging and risk management activities:                |  |                              |        |   |      |   |        |  
|                                                       |  |                             
|Net realized gains (losses)                            |  | $                            | (29    | ) |      | $ | 10     |  
|Reversal of previously recognized net unrealized gains |  |                              | (9     | ) |      |   | (28    | )
|Net unrealized gains (losses) on open positions        |  |                              | (15    | ) |      |   | 10     |  
|                                                       |  |                              |        |   |      |   |        |  
|Total                                                  |  | $                            | (53    | ) |      | $ | (8     | )
|                                                       |  |                              |        |   |      |   |        |  
|Average revenues per MWh:                              |  |                              |        |   |      |   |        |  
|                                                       |  |                             
|Residential                                            |  | $                            | 99.74  |   |      | $ | 90.70  |  
|Small business                                         |  | $                            | 110.44 |   |      | $ | 100.83 |  
|Large business and other customers                     |  | $                            | 75.05  |   |      | $ | 67.53  |  
|                                                       |  |                             
|Estimated share of ERCOT retail markets (b):           |  |                              |        |   |      |   |        |  
|                                                       |  |                             
|Historical service territory:                          |  |                              |        |   |      |   |        |  
|Residential (c)                                        |  |                              | 79     | % |      |   | 86     | %
|Small business (c)                                     |  |                              | 76     | % |      |   | 83     | %
|Total ERCOT:                                           |  |                              |        |   |      |   |        |  
|Residential                                            |  |                              | 43     | % |      |   | 46     | %
|Small business                                         |  |                              | 30     | % |      |   | 32     | %
|Large business and other customers                     |  |                              | 25     | % |      |   | 41     | %

---

|(a) | Customers with demand of less than 1 MW annually.
|--- | -------------------------------------------------

|(b) | Based on number of meters, except large business which is based upon annualized consumption.
|--- | --------------------------------------------------------------------------------------------

|(c) | Estimated market share is based on the number of customers that have choice.
|--- | ----------------------------------------------------------------------------





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TXU Energy Holdings



Cost of Energy Sold Data



|                                                                                                                  |  |                              |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                  |  | Three Months Ended March 31, |       
|                                                                                                                  |  | 2005                         |        |   | 2004 |  
|Fuel and purchased power costs (cost of energy sold, which excludes    generation plant operating costs) per MWh: |  |                              |        |   |      |   |        |  
|                                                                                                                  |  |                             
|Nuclear generation                                                                                                |  | $                            | 4.18   |   |      | $ | 4.41   |  
|Lignite/coal generation                                                                                           |  | $                            | 11.93  |   |      | $ | 13.28  |  
|Gas/oil generation and purchased power                                                                            |  | $                            | 51.55  |   |      | $ | 43.90  |  
|                                                                                                                  |  |                             
|Delivery fees per MWh                                                                                             |  | $                            | 25.16  |   |      | $ | 22.34  |  
|                                                                                                                  |  |                             
|Production and purchased power volumes (GWh):                                                                     |  |                              |        |   |      |   |        |  
|                                                                                                                  |  |                             
|Nuclear (baseload)                                                                                                |  |                              | 4,797  |   |      |   | 4,854  |  
|Lignite/coal (baseload)                                                                                           |  |                              | 10,520 |   |      |   | 10,203 |  
|Gas/oil                                                                                                           |  |                              | 260    |   |      |   | 910    |  
|Purchased power                                                                                                   |  |                              | 9,806  |   |      |   | 14,232 |  
|                                                                                                                  |  |                              |        |   |      |   |        |  
|Total energy supply                                                                                               |  |                              | 25,383 |   |      |   | 30,199 |  
|Less line loss and other                                                                                          |  |                              | 423    |   |      |   | 706    |  
|                                                                                                                  |  |                              |        |   |      |   |        |  
|Net energy supply volumes                                                                                         |  |                              | 24,960 |   |      |   | 29,493 |  
|                                                                                                                  |  |                              |        |   |      |   |        |  
|Baseload capacity factors (%):                                                                                    |  |                              |        |   |      |   |        |  
|                                                                                                                  |  |                             
|Nuclear                                                                                                           |  |                              | 96.9   | % |      |   | 97.0   | %
|Lignite/coal                                                                                                      |  |                              | 87.8   | % |      |   | 83.7   | %



36



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TXU Energy Holdings



Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004



Operating revenues declined $154 million, or 8%, to $1.8 billion in 2005.
Retail electricity revenues decreased $148 million, or 11%, to $1.3 billion.



| |  |  | This decline reflected a $288 million decrease attributable to a 20% drop in sales volumes, primarily reflecting loss of customers due to competitive activity, particularly in the
large business market, as well as milder weather. Lower business market volumes also reflected a strategy to target higher margin customer segments.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The effect of lower retail volumes was partially offset by $140 million in higher average pricing due to increased price-to-beat rates, reflecting regulatory-approved fuel factor
increases in 2004 and higher pricing in the competitive business market, both resulting from higher natural gas prices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Retail electricity customer counts at March 31, 2005 declined 4.9% from March 31, 2004.
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Wholesale electricity revenues grew $50 million, or 11%, to $516 million reflecting a $90 million increase due to the effect of increased natural gas prices on wholesale prices,
partially offset by a $40 million decrease attributable to a 9% decline in sales volumes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The comparison to 2004 reflects an increase in wholesale electricity sales volumes in the first quarter of 2004 due to the establishment of the new northeast zone in ERCOT. Because
TXU Energy Holdings has a generation plant and a relatively small retail customer base in the new zone, wholesale sales volumes increased, and wholesale power purchases also increased to meet retail sales demand in other zones and minimize
congestion costs. Completion of transmission projects later in 2004 reduced congestion costs, resulting in normalized sales and purchase volumes in the first quarter of 2005.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The decrease in other revenues of $11 million primarily reflected the sale of the gas transportation business in June 2004.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



Results from hedging and risk management activities, which
are reported in revenues and include both realized and unrealized gains and losses, totaled $53 million in net losses in 2005 and $8 million in net losses in 2004. Because the hedging activities are intended to mitigate the risk of commodity price
movements on revenues and cost of energy sold, the changes in such results should not be viewed in isolation, but rather taken together with the effects of pricing and cost changes on gross margin. Results in 2005 included:



| |  |  | $24 million in net losses reclassified from accumulated other comprehensive income; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | $20 million in net unrealized losses from hedges against lower natural gas prices.
| | - |  | ----------------------------------------------------------------------------------



Gross Margin



|                                      |  |                              |       |             |     |   |      |   |             |  |     |  
|------------------------------------- |  | ---------------------------- | ----- | ----------- | --- | - | ---- | - | ----------- |  | --- | -
|                                      |  | Three Months Ended March 31, |      
|                                      |  | 2005                         |       | % ofRevenue |     |   | 2004 |   | % ofRevenue | 
|Operating revenues                    |  | $                            | 1,803 |             | 100 | % |      | $ | 1,957       |  | 100 | %
|Costs and expenses:                   |  |                              |       |             |     |   |      |   |             |  |     |  
|Cost of energy sold and delivery fees |  |                              | 1,056 |             | 59  | % |      |   | 1,254       |  | 64  | %
|Generation plant operating costs      |  |                              | 152   |             | 8   | % |      |   | 167         |  | 9   | %
|Depreciation and amortization         |  |                              | 78    |             | 4   | % |      |   | 82          |  | 4   | %
|                                      |  |                              |       |             |     |   |      |   |             |  |     |  
|Gross margin                          |  | $                            | 517   |             | 29  | % |      | $ | 454         |  | 23  | %
|                                      |  |                              |       |             |     |   |      |   |             |  |     |  



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##### Table of Contents

Gross margin increased $63 million, or 14%, to $517 million in 2005. Higher gross margin reflected
initiatives taken to respond to higher wholesale power prices that were driven by higher natural gas prices, including retail pricing actions and more cost effective sourcing of power. The gross margin increase reflected higher retail and wholesale
prices partially offset by the effect of lower volumes and lower results from hedging and risk management activities. A favorable effect on gross margin of lower cost of energy sold (fuel and purchased power costs) was largely offset by higher
delivery fees on a per MWh basis. Cost of energy sold reflected the favorable effect of lower purchased power volumes (due to lower sales volumes), improved efficiency of coal/lignite-fired generation plants and lower use of gas-fired generation,
partially offset by higher per MWh cost of purchased power due to rising wholesale prices.



Operating costs decreased $15 million, or 9%, to $152 million in 2005. The decline reflected an $8 million effect of no longer providing customer care support to TXU Gas (largely offset by lower related revenues), the
operations of which were sold in October 2004, and the absence of $4 million of costs associated with the gas transportation business sold in June 2004. The decline also reflects $3 million in lower pension and other postretirement benefit costs
(see discussion in SG&A expenses below regarding these costs).



Depreciation and amortization (including amounts shown in the gross margin table above) decreased $18 million, or 19%, to $79 million. The decline included $14 million due to the effect of the transfer of information technology assets,
principally capitalized software, to a TXU Corp. affiliate in connection with the Capgemini outsourcing transaction and $3 million due to the reduction of 2005 depreciation rates for lignite/coal-fired plants due to an increase in the estimated
useful lives.



SG&A expenses decreased by $35
million, or 24%, to $113 million in 2005. The decline reflected:



| |  |  | $15 million in lower bad debt expense reflecting stricter disconnect policies, more focused collection activities, targeted customer marketing and lower accounts receivable
balances;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a net $12 million decline due to cost reduction initiatives, including the effects of the Capgemini agreement;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | a $3 million net decrease in employee retirement-related expenses due to the assumption by TXU Electric Delivery of $6 million in pension and other postretirement benefit costs
related to service of TXU Energy Holdings employees prior to the unbundling of TXU Corp.s electric utility business and the deregulation of the Texas electricity industry effective January 1, 2002. This change in retirement-related
expense allocation was based on an agreement between TXU Energy Holdings and TXU Electric Delivery effective January 1, 2005; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $2 million in reduced incentive compensation expense.
| | - |  | -----------------------------------------------------



Other deductions decreased $19 million to $1 million in 2005. This line item reflects charges in 2004 totaling $17 million for employee severance and
asset writedowns related to the restructuring actions. Activity in 2005 included:



| |  |  | a $12 million charge related to nonperformance of a counterparty in connection with a trading coal contract;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | $2 million in equity losses (representing amortization expense) in the TXU Corp. entity holding the capitalized software licensed to Capgemini;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $2 million in transition costs associated with the Capgemini outsourcing agreement; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | a $15 million credit arising from a change in estimated sublease proceeds, due to the receipt of indicative bids in the quarter, reflected in the net liability recorded in 2004
related to leased gas-fired combustion turbines no longer in service. As the original charge associated with this liability was recorded in this line item, the related credit is being similarly reported.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Interest income increased by $7 million to $9 million in 2005 reflecting higher interest on short-term
investments and higher average advances to affiliates.



Interest expense and related charges increased by $12 million, or 15%, to $91 million in 2005. The increase reflected $9 million due to higher average debt levels and $3 million representing higher interest reimbursement to TXU Electric
Delivery for carrying costs related to securitized regulatory assets.



The effective income tax rate was 31.4% in both 2005 and 2004. There were no material unusual items affecting the comparison.



Income from continuing operations increased $87 million to $203 million in 2005 driven by improved gross margin and lower SG&A expenses. Net pension
and postretirement benefit costs reduced net income by $5 million in 2005 and $10 million in 2004.



39



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##### Table of Contents

TXU Electric Delivery



Financial Results



|                                             |  |                              |     |   |      |   |     |  
|-------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                             |  | Three Months Ended March 31, |    
|                                             |  | 2005                         |     |   | 2004 |  
|Operating revenues                           |  | $                            | 550 |   |      | $ | 523 |  
|                                             |  |                              |     |   |      |   |     |  
|Costs and expenses:                          |  |                              |     |   |      |   |     |  
|Operating costs                              |  |                              | 181 |   |      |   | 175 |  
|Depreciation and amortization                |  |                              | 105 |   |      |   | 87  |  
|Selling, general and administrative expenses |  |                              | 49  |   |      |   | 49  |  
|Franchise and revenue-based taxes            |  |                              | 57  |   |      |   | 59  |  
|Other income                                 |  |                              | (1  | ) |      |   | (2  | )
|Other deductions                             |  |                              | 4   |   |      |   |    |  
|Interest income                              |  |                              | (15 | ) |      |   | (12 | )
|Interest expense and other charges           |  |                              | 68  |   |      |   | 71  |  
|                                             |  |                              |     |   |      |   |     |  
|Total costs and expenses                     |  |                              | 448 |   |      |   | 427 |  
|                                             |  |                              |     |   |      |   |     |  
|Income before income taxes                   |  |                              | 102 |   |      |   | 96  |  
|Income tax expense                           |  |                              | 31  |   |      |   | 30  |  
|                                             |  |                              |     |   |      |   |     |  
|Net Income                                   |  | $                            | 71  |   |      | $ | 66  |  
|                                             |  |                              |     |   |      |   |     |  



40



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##### Table of Contents

Operating Data



|                                                                           |  |                              |        |      |   |       
|-------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|                                                                           |  | Three Months Ended March 31,
|                                                                           |  | 2005                         |        | 2004
|Operating statistics  volumes:                                            |  |                              |        |      |   |       
|Electric energy delivered (GWh)                                            |  |                              | 23,448 |      |   | 23,631
|                                                                           |  |                             
|Reliability statistics:                                                    |  |                              |        |      |   |       
|System Average Interruption Duration Index (SAIDI) (nonstorm)(a)           |  |                              | 72.76  |      |   | 82.31 
|System Average Interruption Frequency Index (SAIFI) (nonstorm)(a)          |  |                              | 0.92   |      |   | 1.04  
|Customer Average Interruption Duration Index (CAIDI) (nonstorm)(a)         |  |                              | 78.72  |      |   | 78.95 
|                                                                           |  |                             
|Electricity points of delivery (end of period and in thousands):           |  |                              |        |      |   |       
|                                                                           |  |                             
|Electricity distribution points of delivery (based on number of meters)(b) |  |                              | 2,985  |      |   | 2,942 
|Electricity distribution revenues (c):                                     |  |                              |        |      |   |       
|Affiliated (TXU Energy Holdings)                                           |  | $                            | 311    |      | $ | 349   
|Nonaffiliated                                                              |  |                              | 182    |      |   | 121   
|                                                                           |  |                              |        |      |   |       
|Total distribution revenues                                                |  |                              | 493    |      |   | 470   
|Third-party transmission revenues                                          |  |                              | 51     |      |   | 47    
|Other miscellaneous revenues and eliminations                              |  |                              | 6      |      |   | 6     
|                                                                           |  |                              |        |      |   |       
|Total operating revenues                                                   |  | $                            | 550    |      | $ | 523   
|                                                                           |  |                              |        |      |   |       

---

|(a) | SAIDI is the number of minutes the average customer is out of electric service in a year. SAIFI is the number of times a year that the average customer experiences an interruption
to electric service. CAIDI is the duration in minutes of the average interruption to electric service.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Includes lighting sites, primarily guard lights, for which TXU Energy Holdings is the REP but are not included in TXU Energy Holdings customer count. Such sites totaled 94,187
and 99,591 at March 31, 2005 and 2004, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Includes $33 million and $14 million for the three months ended March 31, 2005 and 2004, respectively, of transition charges associated with the issuance of securitization bonds.
Also includes disconnect/reconnect fees.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

TXU Electric Delivery



Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004



Operating revenues increased $27 million, or 5%, to $550 million in 2005.
This change reflected:



| |  |  | $19 million in transition charges associated with the issuance of securitization bonds in June 2004;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | $6 million from increased distribution tariffs to recover higher transmission costs;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | $5 million from implementation of power factor billing (power factor billing is a tariff adjustment applied to nonresidential end-use consumers that utilize inefficient equipment);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $4 million in transmission rate increases approved in 2004; and
| | - |  | ---------------------------------------------------------------



| |  |  | a $7 million decrease in revenue due to a 1% decline in delivered volumes, as milder weather more than offset growth in points of delivery.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



Gross Margin



|                                                     |  |                              |     |             |     |   |      |   |             |  |     |  
|---------------------------------------------------- |  | ---------------------------- | --- | ----------- | --- | - | ---- | - | ----------- |  | --- | -
|                                                     |  | Three Months Ended March 31, |    
|                                                     |  | 2005                         |     | % ofRevenue |     |   | 2004 |   | % ofRevenue | 
|Operating revenues                                   |  | $                            | 550 |             | 100 | % |      | $ | 523         |  | 100 | %
|Costs and expenses:                                  |  |                              |     |             |     |   |      |   |             |  |     |  
|Transmission and distribution system operating costs |  |                              | 181 |             | 33  | % |      |   | 175         |  | 33  | %
|Depreciation and amortization                        |  |                              | 105 |             | 19  | % |      |   | 83          |  | 16  | %
|                                                     |  |                              |     |             |     |   |      |   |             |  |     |  
|Gross margin                                         |  | $                            | 264 |             | 48  | % |      | $ | 265         |  | 51  | %
|                                                     |  |                              |     |             |     |   |      |   |             |  |     |  



Gross margin decreased
$1 million to $264 million in 2005, as the effect of lower volumes and an increase in operating costs were largely offset by higher transmission-related tariffs. The increase in operating costs of $6 million, or 3%, to $181 million, reflected $3
million in third-party transmission costs and $3 million in property taxes due to normal property additions and replacements.



Depreciation and amortization (including amounts shown in the gross margin table above) increased $18 million, or 21%, to $105 million in 2005. The
increase reflected $19 million in higher amortization of regulatory assets associated with the issuance of securitization bonds (offsetting the same amount of revenue increase) and $3 million in higher depreciation due to normal additions and
replacements of property, plant, and equipment, partially offset by a $4 million decline reflecting a transfer of information technology assets, principally capitalized software, to a TXU Corp. affiliate in connection with the Capgemini outsourcing
transaction.



SG&A expense was flat to 2004 at $49 million,
reflecting $5 million in net lower shared services costs including the effects of the Capgemini agreement, offset by $4 million in higher pension and other postretirement benefits expense. This increase reflected the assumption by TXU Electric
Delivery of $6 million in pension and other postretirement benefit costs related to service of TXU Energy Holdings employees prior to the unbundling of TXU Corp.s electric utility business and the deregulation of the Texas electricity
industry effective January 1, 2002. This change in retirement-related expense allocation was based on an agreement between TXU Energy Holdings and TXU Electric Delivery effective January 1, 2005. TXU Electric Delivery believes that this agreement
allows for its operating results to more accurately reflect employee-related costs associated with regulated electric utility activities.



Other deductions totaled $4 million in 2005. This line item includes $2 million of severance-related charges, $1 million in costs associated with
transitioning the outsourced activities to Capgemini and $1 million related to TXU Electric Deliverys portion of the equity losses (representing amortization expense) in the TXU Corp. entity holding the capitalized software licensed to
Capgemini.



42



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##### Table of Contents

Interest income increased $3 million to $15 million in 2005 driven by reimbursement from TXU Energy
Holdings for debt service associated with transition bonds.



Interest expense decreased $3 million, or 4%, to $68 million in 2005. The decrease reflected a $7 million impact of lower average interest rates, partially offset by a $4 million impact of higher average borrowings.



The effective income tax rate decreased to 30.4% in 2005 from 31.3% in 2004
due primarily to higher nontaxable life insurance cash surrender values associated with employee benefit plans.



Net income increased $5 million, or 8%, to $71 million, primarily reflecting higher transmission-related tariffs and lower net interest expense, partially
offset by the effect of milder weather on revenues. Net pension and postretirement benefit costs reduced net income by $6 million in 2005 and $4 million in 2004.



COMPREHENSIVE INCOME  Continuing Operations



Cash flow hedge activity reported in other comprehensive income from continuing operations included:



|                                                                                              |  |                              |    |      |   |     |  
|--------------------------------------------------------------------------------------------- |  | ---------------------------- | -- | ---- | - | --- | -
|                                                                                              |  | Three Months Ended March 31, |   
|                                                                                              |  | 2005                         |    | 2004 |  
|Cash flow hedge activity (net of tax):                                                        |  |                              |    |      |   |     |  
|Net change in fair value of hedges  gains/(losses):                                          |  |                              |    |      |   |     |  
|Commodities                                                                                   |  | $                            | 15 |      | $ | (58 | )
|Financing  interest rate swaps                                                               |  |                              |   |      |   | (4  | )
|                                                                                              |  |                              |    |      |   |     |  
|                                                                                              |  |                              | 15 |      |   | (62 | )
|                                                                                              |  |                             
|Losses realized in earnings (net of tax):                                                     |  |                              |    |      |   |     |  
|Commodities                                                                                   |  |                              | 16 |      |   | 4   |  
|Financing  interest rate swaps                                                               |  |                              | 4  |      |   | 8   |  
|                                                                                              |  |                              |    |      |   |     |  
|                                                                                              |  |                              | 20 |      |   | 12  |  
|                                                                                              |  |                             
|Effect of cash flow hedges reported in comprehensive results related to continuing operations |  | $                            | 35 |      | $ | (50 | )
|                                                                                              |  |                              |    |      |   |     |  



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##### Table of Contents

FINANCIAL CONDITION



LIQUIDITY AND CAPITAL RESOURCES



Cash Flows Cash flows provided by operating activities for the three months ended March 31, 2005 totaled $197 million compared to $338
million for the three months ended March 31, 2004. The principal drivers of the $141 million decrease were payments in 2005 of $84 million, net of insurance recoveries, in settlement of the consolidated amended securities class action lawsuit and a
$42 million federal income tax payment related to 2004.



Cash
flows provided by financing activities totaled $44 million in 2005 compared to $603 million used in financing activities in 2004. Net issuances and repayments of borrowings provided cash of $181 million in 2005 compared to using $566 million in
2004. Common stock dividends paid totaled $134 million in 2005 and $40 million in 2004.



Cash flows used in investing activities totaled $248 million in 2005 compared to $186 million used during 2004. Capital expenditures, including nuclear fuel, were $249 million in 2005 and $194 million in 2004. Capital
expenditures in 2005 increased investment in transmission projects to reduce congestion and increased spending for generation projects including the nuclear steam generator replacement.



Depreciation and amortization expense reported in the statement of cash flows exceeds the amount reported in the statement
of income by $16 million for 2005. This difference represents amortization of nuclear fuel, which is reported as cost of energy sold in the statement of income consistent with industry practice.



Long-term Debt Activity During the three months ended
March 31, 2005, TXU Corp. and its subsidiaries issued, reacquired, or made scheduled principal payments on long-term debt as follows (all amounts presented are principal):



|                                |  |           |    |             |   |   
|------------------------------- |  | --------- | -- | ----------- | - | --
|                                |  | Issuances |    | Retirements
|TXU Corp.:                      |  |           |    |             |   |   
|Equity-linked                   |  | $         |   |             | $ | 25
|Other long-term debt            |  |           |   |             |   | 5 
|                                |  |          
|TXU Energy Holdings:            |  |           |    |             |   |   
|Pollution control revenue bonds |  |           | 71 |             |   |  
|                                |  |          
|TXU Electric Delivery:          |  |           |    |             |   |   
|Transition bonds                |  |           |   |             |   | 21
|                                |  |          
|US Holdings:                    |  |           |    |             |   |   
|Long-term debt                  |  |           |   |             |   | 1 
|                                |  |           |    |             |   |   
|Total                           |  | $         | 71 |             | $ | 52
|                                |  |           |    |             |   |   



See Note 3 to
Financial Statements for further detail of debt issuances and retirements and financing arrangements.



In April 2005, as part of its ongoing liability management initiative, TXU Corp. repurchased $1 million principal amount of its outstanding Series L and
$5 million principal amount of its outstanding Series M equity-linked debt securities for $8 million. The $2 million premium primarily reflects the in-the-money value (to holders) of the associated equity purchase contracts, which was charged to
additional paid-in-capital.



On May 2, 2005, TXU Energy
Holdings repurchased all of the Brazos River Authority Pollution Control Revenue (Refunding) Bonds Series 1994A, in aggregate principal amount of $39 million, at a price of 100% of the principal amount thereof, upon the scheduled mandatory tender
date for this series. TXU Energy Holdings currently plans to reissue the bonds later this year.



44



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##### Table of Contents

Credit Facilities At May 5, 2005, TXU Corp. had access to credit
facilities totaling $4.0 billion of which $2.8 billion was unused. These credit facilities are used for working capital and general corporate purposes and to support issuances of letters of credit. See Note 3 to Financial Statements for details of
the arrangements.



Short-term Borrowings At March 31, 2005, TXU Corp. had outstanding short-term borrowings consisting of bank borrowings of $395 million at a weighted average interest rate of 3.27%.At December 31, 2004, TXU Corp. had outstanding bank borrowings of $210
million at a weighted average interest rate of 5.25%.



Sale of Receivables  TXU Corp. has established an accounts receivable securitization program. The activity under this program is accounted for as a sale of accounts receivable in accordance with SFAS 140. Under the
program, subsidiaries of TXU Corp. (originators) sell trade accounts receivable to TXU Receivables Company, a consolidated wholly-owned bankruptcy remote direct subsidiary of TXU Corp., which sells undivided interests in the purchased accounts
receivable for cash to special purpose entities established by financial institutions. All new trade receivables under the program generated by the originators are continuously purchased by TXU Receivables Company with the proceeds from collections
of receivables previously purchased. Funding under the program at March 31, 2005 and December 31, 2004 totaled $505 million and $474 million, respectively. See Note 3 to Financial Statements for a more complete description of the program including
the financial impact on earnings and cash flows for the periods presented and the contingencies that could result in termination of the program.



Liability and Capital Management Initiative  TXU Corp. intends to continue to increase value and reduce risk through purchases,
redemptions and issuances of its debt and equity-linked debt securities and preferred and common equity securities. On May 5, 2005, TXU Corp. announced its intent to (i) increase the accelerated share repurchase program by 6 million shares,
consistent with the previously disclosed plan to offset share issuances and maintain average diluted shares of common stock outstanding at approximately 240 million for 2005 and (ii) redeem all $300 million of its outstanding preference stock during
the second quarter of 2005. TXU Corp.s actual plan may change as a result of subsequent actions taken by, and discussions with, credit rating agencies. See Credit Ratings below.



Credit Ratings Current credit ratings for TXU Corp. and
certain of its subsidiaries are presented below:



|        |  |                    |  |                    |  |                       |  |                       |  |                    
|------- |  | ------------------ |  | ------------------ |  | --------------------- |  | --------------------- |  | -------------------
|        |  | TXU Corp.          |  | US Holdings        |  | TXU Electric Delivery |  | TXU Electric Delivery |  | TXU Energy Holdings
|        |  | (Senior Unsecured) |  | (Senior Unsecured) |  | (Secured)             |  | (Senior Unsecured)    |  | (Senior Unsecured) 
|S&P     |  | BBB-               |  | BBB-               |  | BBB                   |  | BBB-                  |  | BBB                
|Moodys |  | Ba1                |  | Baa3               |  | Baa1                  |  | Baa2                  |  | Baa2               
|Fitch   |  | BBB-               |  | BBB-               |  | A-/BBB+               |  | BBB+                  |  | BBB                



TXU Electric
Deliverys first mortgage bonds are rated A- and its senior secured notes are rated BBB+ by Fitch. Moodys currently maintains a stable outlook for TXU Corp., US Holdings, TXU Energy Holdings and TXU Electric Delivery. Fitch changed its
outlook to negative for TXU Corp., US Holdings and TXU Energy Holdings and reaffirmed its stable outlook for TXU Electric Delivery on May 6, 2005. S&P placed each such entity on negative watch on May 6, 2005.



These ratings are investment grade, except for Moodys rating of TXU
Corp.s senior unsecured debt, which is one notch below investment grade.



A rating reflects only the view of a rating agency, and is not a recommendation to buy, sell or hold securities. Any rating can be revised upward or downward at any time by a rating agency if such rating agency
decides that circumstances warrant such a change.



It is
anticipated that any downgrade by S&P would be one notch. The negative impact of such a downgrade on TXU Corp.s liquidity is currently estimated to be approximately $100 million.



Financial Covenants, Credit Rating Provisions and Cross Default
Provisions  The terms of certain financing arrangements of subsidiaries of TXU Corp. contain financial covenants that require maintenance of specified fixed charge coverage ratios and leverage ratios and/or contain minimum net worth
covenants. As of March 31, 2005, all such applicable covenants were complied with.



45



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##### Table of Contents

Material Credit Rating Covenants



TXU Energy Holdings has provided a guarantee of the obligations under TXU Corp.s lease of its headquarters building
(approximately $115 million at March 31, 2005). In the event of a downgrade of TXU Energy Holdings credit rating to below investment grade, a letter of credit would need to be provided within 30 days of any such rating decline.



Under the terms of leases aggregating $149 million in remaining lease
payments, if TXU Energy Holdings credit rating were downgraded to below investment grade by any specified rating agency, TXU Energy Holdings could be required to sell the assets, assign the leases to a new obligor that is investment grade,
post a letter of credit or defease the leases. In July 2005, a rail spur lease will terminate and result in a reduction of $97 million of the $149 million in remaining lease payments, which are subject to the rating downgrade provision.



TXU Energy Holdings has entered into certain commodity contracts and lease
arrangements that in some instances give the other party the right, but not the obligation, to request TXU Energy Holdings to post collateral in the event that its credit rating falls below investment grade. Based on its current commodity contract
positions, if TXU Energy Holdings were downgraded to below investment grade by specified rating agencies, counterparties would have the option to request TXU Energy Holdings to post additional collateral of up to approximately $148 million at March
31, 2005. The amount TXU Energy Holdings could be required to post under these transactions depends in part on the value of the contracts at that time.



ERCOT also has rules in place to assure adequate credit worthiness for parties that schedule power on the ERCOT System. Under those rules, if TXU Energy
Holdings credit rating were downgraded to below investment grade by any specified rating agency, TXU Energy Holdings could be required to post collateral of approximately $6 million.



Other arrangements of TXU Corp., including credit facilities, contain terms
pursuant to which the interest rates charged under the agreements may be adjusted depending on the credit ratings of TXU Corp. or its subsidiaries.



Material Cross Default Provisions



Certain financing arrangements contain provisions that would result in an event of default if there were a failure under other financing arrangements to
meet payment terms or to observe other covenants that would result in an acceleration of payments due. Such provisions are referred to as cross default provisions.



A default by TXU Energy Holdings or TXU Electric Delivery or any subsidiary thereof in respect of indebtedness in a
principal amount in excess of $50 million would result in a cross default under the $3.5 billion joint credit facilities expiring in June 2008, March 2010 and June 2010. Under these credit facilities, a default by TXU Energy Holdings or any
subsidiary thereof would cause the maturity of outstanding balances under such facility to be accelerated as to TXU Energy Holdings but not as to TXU Electric Delivery. Also, under this credit facility, a default by TXU Electric Delivery or any
subsidiary thereof would cause the maturity of outstanding balances under such facility to be accelerated as to TXU Electric Delivery but not as to TXU Energy Holdings.



A default by US Holdings or any subsidiary thereof on indebtedness in the unpaid principal amount in excess of $1 million
would result in a default of the TXU Mining (a subsidiary of TXU Energy Holdings) $30 million senior notes that mature August 1, 2005.



TXU Energy Holdings has entered into certain mining and related equipment leasing arrangements aggregating $81 million that would terminate upon the
default of any other obligations of TXU Energy Holdings owed to the lessor.



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##### Table of Contents

The accounts receivable securitization program also contains a cross default provision with a threshold
of $50 million applicable to each of the originators under the program. TXU Receivables Company and TXU Business Services Company each have a cross default threshold of $50 thousand. If either an originator, TXU Business Services or TXU Receivables
Company defaults on indebtedness of the applicable threshold, the facility could terminate.



TXU Corp. and TXU Energy Holdings enter into energy-related and financial contracts, the master forms of which contain provisions whereby an event of default or acceleration of settlement would occur if TXU Energy
Holdings were to default under an obligation in respect of borrowings in excess of thresholds, which vary, stated in the contracts. The accelerated share repurchase program may also be required to settle early in the event of a similar default.



Other arrangements, including leases, have cross default
provisions, the triggering of which would not result in a significant effect on liquidity.



Long-term Contractual Obligations and Commitments There have been no significant changes in contractual cash obligations of
TXU Corp., since December 31, 2004 as disclosed in the 2004 Form 10-K.



OFF
BALANCE SHEET ARRANGEMENTS, INCLUDING VARIABLE INTEREST ENTITIES



TXU Corp. has established an accounts receivable securitization program. See discussion above under Sale of Receivables and in Note 3 to Financial Statements.



In May 2004, TXU Corp. entered into a services agreement with Capgemini Energy LP (Capgemini). Outsourced base support
services performed by Capgemini for a fixed fee, subject to adjustment for volumes or other factors, include information technology, customer call center, billing, human resources, supply chain and certain accounting activities.



As part of the agreement, Capgemini was provided a royalty-free right, under
an asset license arrangement, to use TXU Corp.s information technology assets, consisting primarily of capitalized software. TXU Corp. obtained a 2.9% limited partnership interest in Capgemini in exchange for the asset license. TXU Corp. has
the right to sell (the put option) its interest and the licensed software to Cap Gemini North America Inc., the parent of Capgemini, for $200 million, plus its share of Capgeminis undistributed earnings, upon expiration of the services
agreement or earlier upon the occurrence of certain unexpected events. The put option was recorded as a noncurrent asset at its estimated $177 million fair value. Cap Gemini North America Inc. has the right to purchase these interests under the same
terms and conditions. The partnership interest has been recorded at an initial value of $2.9 million and is being accounted for on the cost method.



Subject to certain terms and conditions, Cap Gemini North America, Inc. and its parent, Cap Gemini S.A., have guaranteed the performance and payment
obligations of Capgemini under the services agreement, as well as the payment of $200 million in connection with the put option.



Also see Note 6 to Financial Statements regarding guarantees.



COMMITMENTS AND CONTINGENCIES



See Note 6 to Financial Statements for additional discussion of commitments and contingencies.



47



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##### Table of Contents

REGULATION AND RATES



Price-to-Beat Rates  TXU Energy Holdings filed a request for a price-to-beat increase on April 15, 2005. If approved by the
Commission, the price-to-beat increase would raise the average monthly residential bill by 9.9%.



Transmission Rates In February 2005, TXU Electric Delivery filed an application for an interim update of its wholesale
transmission rate, which will result in an annualized revenue increase of $23 million. Approximately $14 million of this increase is recoverable through transmission rates charged to wholesale customers, and the remaining $9 million is recoverable
from REPs through the retail transmission cost recovery factor (TCRF) component of TXU Electric Deliverys distribution rates charged to REPs. On April 29, 2005, the Commission approved an increase in TXU Electric Deliverys interim
wholesale transmission rate, which was effective immediately.



In order to recover increased affiliate and third-party transmission costs, TXU Electric Delivery is allowed to request an update to the TCRF component of its distribution rate charged to REPs twice a year. In March 2005, the Commission
approved an estimated annualized increase of $1.6 million in the TCRF component of TXU Electric Deliverys distribution rates charged to REPs. The effect of TXU Electric Deliverys wholesale transmission rate increase described in the
preceding paragraph will likely be included in TXU Electric Deliverys September 2005 TCRF update. Consolidated results are not benefited by higher distribution rates to the extent that such higher rates are absorbed by TXU Energy Holdings (as
a REP).



In 2004, certain cities within TXU Corp.s
historical service territory, acting in their role as a regulatory authority (with original jurisdiction), initiated inquiries to determine if the rates of TXU Electric Delivery, which have been established by the Commission, are just and
reasonable. Twenty-three cities passed such resolutions (and eleven passed resolutions supporting the other cities). TXU Electric Delivery has the right to appeal any city action to the Commission. In the fourth quarter of 2004, TXU Electric
Delivery recorded a $21 million charge, reported in other deductions, for estimated settlement payments arising from the resolution of these inquiries. The settlement agreement, which was finalized February 22, 2005, avoids any immediate rate
actions, but requires TXU Electric Delivery to file a rate case in 2006, based on a 2005 test year, unless the cities and TXU Electric Delivery mutually agree that such a filing is unnecessary. The final settlement amount is undetermined; however,
TXU Electric Delivery believes it will approximate the amount accrued.



ERCOT Market Issues - The Texas Public Utility Regulatory Act (PURA) and the Commission are subject to sunset review by the Texas Legislature in the 2005 legislative session. Sunset review entails, generally, a
comprehensive review of the need for and efficacy of an administrative agency (e.g., the Commission), along with an evaluation of the advisability of any changes to that agencys authorizing legislation (e.g., PURA). As part of the sunset
review process, the legislative Sunset Advisory Commission has recommended that the Legislature reauthorize the Commission for six years, and has recommended other changes to PURA that are not expected to have a material impact upon TXU Corp.s
operations. The Legislature is currently considering additional legislation and could enact other changes to PURA, but TXU Corp. cannot predict whether any such changes might have a material impact on its operations.



Texas Legislative Session  The Texas legislature is
currently in session and is considering various matters, including changes to various tax provisions and changes to the Public Utilities Regulatory Act (PURA) resulting from the state-mandated sunset review of the Public Utility Commission of Texas.
TXU Corp. cannot predict the ultimate outcome of this or any other matters under consideration by the legislature.



Wholesale Market Design In August 2003, the Commission adopted a rule that, if fully implemented, would alter the wholesale market
design in ERCOT. The rule requires ERCOT:



| |  |  | to use a stakeholder process to develop a new wholesale market model;
| | - |  | ---------------------------------------------------------------------



| |  |  | to operate a voluntary day-ahead energy market;
| | - |  | -----------------------------------------------



| |  |  | to directly assign all congestion rents to the resources that caused the congestion;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | to use nodal energy prices for resources;
| | - |  | -----------------------------------------



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| |  |  | to provide information for energy trading hubs by aggregating nodes;
| | - |  | --------------------------------------------------------------------



| |  |  | to use zonal prices for loads; and
| | - |  | ----------------------------------



| |  |  | to provide congestion revenue rights (but not physical rights).
| | - |  | ---------------------------------------------------------------



In December 2004, a cost-benefit analysis prepared by a third-party consultant was filed with the Commission by ERCOT. ERCOT filed its description of the
proposed market design on March 18, 2005, subject to a commitment to update the filing when the description of the financial settlement for the proposed market design is completed. TXU Corp. is currently unable to predict the cost or impact of
implementing any proposed change to the current wholesale market design.



Wholesale Market Investigation  On December 8, 2004, the Commission Staff opened a project (PUC Project No. 30513) to facilitate an ongoing informal fact-finding review of the electric wholesale
market activities of TXU Energy Holdings and its affiliates. Commission Staff indicated that it created this project because of substantial concerns publicly expressed by the Commission and market participants about TXUs recent
activities. TXU Energy Holdings discussions with Commission Staff and the requests for information indicate that the informal review is focused on TXU Energy Holdings offers to sell balancing energy services in ERCOT. Balancing
energy constitutes only about five to ten percent of the energy sold at wholesale in ERCOT. TXU Energy Holdings has been fully cooperating with the Commission Staff in its review and has fully responded to Commission Staffs requests for
information. On April 26, 2005, the Commission Staff issued a report by its consultant, Potomac Economics, concerning the balancing energy transactions at issue. This report indicates no evidence of unlawful activities by TXU Energy Holdings. The
Staff indicated in an accompanying memorandum that it does not intend to pursue any enforcement actions against market participants, including TXU Energy Holdings, in this matter.



Nuclear Decommissioning  Through December 31, 2001, decommissioning costs were recovered from consumers
based upon a 1992 site-specific study through rates placed in effect under TXU Corp.s January 1993 rate increase request. Effective January 1, 2002, decommissioning costs are recovered through a tariff charged to REPs by TXU Electric Delivery
based upon a 1997 site-specific study, adjusted for trust fund assets, as a component of delivery fees effective under TXU Corp.s 2001 Unbundled Cost of Service filing. During the first quarter of 2005, an updated study of the cost to
decommission TXU Corp.s nuclear generating facility was completed and options to fund the cost are being evaluated. Based on the study, changes in the tariff, if any, are expected to be filed with the PUC in mid-2005.



Summary  Although TXU Corp. cannot predict future
regulatory or legislative actions or any changes in economic and securities market conditions, no changes are expected in trends or commitments, other than those discussed in this report, which might significantly alter its basic financial position,
results of operations or cash flows.



CHANGES IN ACCOUNTING STANDARDS



See Note 1 to Financial Statements for discussion of
changes in accounting standards.



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##### Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



Market risk is the risk that TXU Corp. may experience a loss in value as a result of changes in market conditions affecting commodity prices and interest
rates, which TXU Corp. is exposed to in the ordinary course of business. TXU Corp.s exposure to market risk is affected by a number of factors, including the size, duration and composition of its energy and financial portfolio, as well as
volatility and liquidity of markets. TXU Corp. enters into financial instruments such as interest rate swaps to manage interest rate risks related to its indebtedness, as well as exchange traded, over-the-counter contracts and other contractual
commitments to manage commodity price risk as part of its wholesale markets management activities.



RISK OVERSIGHT



TXU Corp.s wholesale markets management operation manages the market, credit and operational risk related to commodity prices of the unregulated energy business within limitations established by senior management and in accordance
with TXU Corp.s overall risk management policies. Interest rate risks are managed centrally by the corporate treasury function. Market risks are monitored daily by risk management groups that operate and report independently of the wholesale
markets management operations, utilizing industry accepted practices and analytical methodologies. These techniques measure the risk of change in value of the portfolio of contracts and the hypothetical effect on this value from changes in market
conditions and include, but are not limited to, Value at Risk (VaR) methodologies.



TXU Corp. has a corporate risk management organization that is headed by a Chief Risk Officer. The Chief Risk Officer, through his designees, enforces all applicable risk limits, including the respective policies and
procedures to ensure compliance with such limits and evaluates the risks inherent in the various businesses of TXU Corp. and their associated transactions. Key risk control activities include, but are not limited to, credit review and approval,
operational and market risk measurement, validation of transaction capture, portfolio valuation and daily portfolio reporting, including mark-to-market valuation, VaR and other risk measurement metrics.



COMMODITY PRICE RISK



TXU Corp. is subject to the inherent risks of market fluctuations in the
price of electricity, natural gas and other energy-related products marketed and purchased. TXU Corp. actively manages its portfolio of owned generation assets, fuel supply and retail sales load to mitigate the near-term impacts of these risks on
its results of operations. TXU Corp., as well as any participant in the market, cannot fully manage the long-term value impact of structural declines or increases in natural gas, power and oil prices and spark spreads (differences between the market
price of electricity and its cost of production).



In managing
energy price risk, TXU Corp. enters into short- and long-term physical contracts, exchange traded and over-the-counter financial contracts as well as bilateral contracts with customers. TXU Corp.s risk management activities also incorporate
some speculative trading activity. The operation continuously monitors the valuation of identified risks and adjusts the portfolio based on current market conditions. Valuation adjustments or reserves are established in recognition that certain
risks exist until full delivery of energy has occurred, counterparties have fulfilled their financial commitments and related financial instruments have either matured or are closed out.



TXU Corp. strives to use consistent assumptions regarding forward market price curves in evaluating and recording the
effects of commodity price risk.



VaR Methodology
 A VaR methodology is used to measure the amount of market risk that exists within the portfolio under a variety of market conditions. The resultant VaR produces an estimate of a portfolios potential for loss given a specified confidence
level and considers among other things, market movements utilizing standard statistical techniques given historical and projected market prices and volatilities. Stress testing of market variables is also conducted to simulate and address abnormal
market conditions.



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The use of this method requires a number of key assumptions, such as use of (i) an assumed confidence
level; (ii) an assumed holding period (i.e. the time necessary for management action, such as to liquidate positions); and (iii) historical estimates of volatility and correlation data.



VaR for Energy Contracts Subject to Mark-to-Market Accounting  This measurement estimates the potential
loss in value, due to changes in market conditions, of all energy-related contracts subject to mark-to-market accounting, based on a specific confidence level and an assumed holding period. Assumptions in determining this VaR include using a 95%
confidence level and a five-day holding period. A probabilistic simulation methodology is used to calculate VaR, and is considered by management to be the most effective way to estimate changes in a portfolios value based on assumed market
conditions for liquid markets.



|                           |  |                |    |                   |   |   
|-------------------------- |  | -------------- | -- | ----------------- | - | --
|                           |  | March 31, 2005 |    | December 31, 2004
|Period-end MtM VaR:        |  | $              | 21 |                   | $ | 20
|Average Month-end MtM VaR: |  | $              | 17 |                   | $ | 20



Earnings at Risk
(EaR)  EaR measures the estimated potential loss of expected pretax earnings for the year presented due to changes in market conditions. EaR metrics include the owned generation assets, estimates of retail load and all contractual
positions except for accrual positions expected to be settled beyond the fiscal year. Assumptions include using a 95% confidence level over a five-day holding period under normal market conditions.



Cash Flow at Risk (CFaR)  CFaR measures the estimated
potential loss of expected cash flow over the next six months, due to changes in market conditions. CFaR metrics include all owned generation assets, estimates of retail load and all contractual positions that impact cash flow during the next six
months. Assumptions include using a 99% confidence level over a six-month holding period under normal market conditions.



|     |  |                |    |                   |   |    
|---- |  | -------------- | -- | ----------------- | - | ---
|     |  | March 31, 2005 |    | December 31, 2004
|EaR  |  | $              | 24 |                   | $ | 24 
|CFaR |  | $              | 62 |                   | $ | 116



Natural Gas
Price & Market Heat-Rate Exposure  Wholesale electricity prices in the Texas market generally move with the price of natural gas because marginal demand is generally met with gas-fired generation plants. Wholesale electricity
prices also move with market heat rates, which are a measure of the efficiency of the marginal supplier (generally gas plants) in generating electricity.



TXU Corp. is both a producer and a buyer of wholesale electricity. The generation operations supply power to the wholesale market and the retail business,
which also purchases power in the wholesale market. The combination of these two businesses provides a partial natural hedge against near-term price volatility in wholesale electricity and natural gas markets. With this natural hedge and TXU
Corp.s wholesale market positions, for 2005 TXU Corp.s portfolio position is substantially balanced with respect to changes in natural gas prices, given TXU Corp.s projections of baseload unit availability and customer churn and
assuming no changes in the price-to-beat rates. The primary sensitivity to natural gas prices over the near term derives from the price-to-beat structure for residential and small business customers; higher price-to-beat rates triggered by higher
gas prices could result in increased profitability but also more customer churn, and vice versa. In the near term, TXU Corp. has more significant exposure to changes in market heat rates than natural gas prices, in part due to TXU Corp.s 8,825
MW of active gas-fired generation capacity in Texas that TXU Corp. currently dispatches for its own use. TXU Corp. expects that increases in heat rates would increase the profitability of its overall market position and its gas-fired generation
fleet, and vice versa.



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Over the longer term, TXU Corp.s exposure to changes in natural gas prices and market heat rates is
expected to increase. The magnitude of this exposure is determined by several key assumptions including, but not limited to, baseload generation capacity factors, gas plant availability, the size of the retail business (both large business and
residential), and the levels and stability of margins in the retail business. In the unlikely case that TXU Corp.s retail price changes exactly and immediately mirrored changes in wholesale electricity markets, TXU Corp. could experience an
approximate $250 million reduction in annual pretax earnings for every $0.50 per million British thermal units reduction in natural gas prices (approximate 7% change in current price) sustained over a full year. In the same scenario of retail price
linkage to wholesale markets, if natural gas prices and other nonprice conditions remained unchanged, but ERCOT electricity prices declined by $5/MWh (approximate 8% change in current price) for a full year because of declining market heat rates,
TXU Corp. could experience an approximate $320 million reduction in annual pretax earnings.



INTEREST RATE RISK



See Note 3 to Financial Statements for a discussion of the issuance and retirement of debt since December 31, 2004.



CREDIT RISK



Credit Risk  Credit risk relates to the risk of loss associated with nonperformance by counterparties. TXU Corp. maintains credit risk
policies with regard to its counterparties to minimize overall credit risk. These policies require an evaluation of a potential counterpartys financial condition, credit rating, and other quantitative and qualitative credit criteria and
specify authorized risk mitigation tools, including but not limited to use of standardized agreements that allow for netting of positive and negative exposures associated with a single counterparty. TXU Corp. has standardized documented processes
for monitoring and managing its credit exposure, including methodologies to analyze counterparties financial strength, measurement of current and potential future credit exposures and standardized contract language that provides rights for
netting and set-off. Credit enhancements such as parental guarantees, letters of credit, surety bonds and margin deposits are also utilized. Additionally, individual counterparties and credit portfolios are managed to preset limits and stress tested
to assess potential credit exposure. This evaluation results in establishing credit limits or collateral requirements prior to entering into an agreement with a counterparty that creates credit exposure to TXU Corp. Additionally, TXU Corp. has
established controls to determine and monitor the appropriateness of these limits on an ongoing basis. Any prospective material adverse change in the payment history or financial condition of a counterparty or downgrade of its credit quality will
result in the reassessment of the credit limit with that counterparty. This process can result in the subsequent reduction of the credit limit or a request for additional financial assurances.



Credit Exposure  TXU Corp.s gross exposure to
credit risk related to trade accounts receivable, as well as commodity contract assets and other derivative assets that arise primarily from hedging activities, totaled $2.274 billion at March 31, 2005.



A large share of gross assets subject to credit risk represents accounts
receivable from the retail sale of electricity to residential and small business customers. The risk of material loss (after consideration of allowances) from nonperformance by these customers is unlikely based upon historical experience. Allowances
for uncollectible accounts receivable are established for the potential loss from nonpayment by these customers based on historical experience and market or operational conditions. In addition, TXU Electric Delivery has exposure to credit risk as a
result of nonperformance by nonaffiliated REPs.



Most of the
remaining trade accounts receivable are with large business customers and hedging counterparties. These counterparties include major energy companies, financial institutions, electric utilities, independent power producers, oil and gas producers and
energy trading companies. The exposure to credit risk



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from these customers and counterparties, excluding credit collateral, as of March 31, 2005, is $1.09 billion net of
standardized master netting contracts and agreements that provide the right of offset of positive and negative credit exposures with individual customers and counterparties. When considering collateral currently held by TXU Corp. (cash, letters of
credit and other security interests), the net credit exposure is $860 million. Of this amount, approximately 85% of the associated exposure is with investment grade customers and counterparties, as determined using publicly available information
including major rating agencies published ratings and TXU Corp.s internal credit evaluation process. Those customers and counterparties without an S&P rating of at least BBB- or similar rating from another major rating agency are
rated using internal credit methodologies and credit scoring models to estimate an S&P equivalent rating. TXU Corp. routinely monitors and manages its credit exposure to these customers and counterparties on this basis.



TXU Corp. is also exposed to credit risk related to the Capgemini put option
with a carrying value of $177 million. Subject to certain terms and conditions, Cap Gemini North America, Inc. and its parent, Cap Gemini S.A., have guaranteed the performance and payment obligations of Capgemini under the services agreement, as
well as the payment in connection with the put option. S&P currently maintains a BB+ rating with a negative outlook for Cap Gemini S. A.



The following table presents the distribution of credit exposure as of March 31, 2005, for trade accounts receivable from large business customers,
commodity contract assets and other derivative assets that arise primarily from hedging activities, by investment grade and noninvestment grade, credit quality and maturity.



|                    |  |                                |       |   |                  |   |     |             |  |   |                      |   |                     |   |                    |  |       |     |  |   |    |  |   |    
|------------------- |  | ------------------------------ | ----- | - | ---------------- | - | --- | ----------- |  | - | -------------------- | - | ------------------- | - | ------------------ |  | ----- | --- |  | - | -- |  | - | ---
|                    |  |                                |       |   |                  |   |     |             |  |   | Exposure by Maturity
|                    |  | ExposurebeforeCreditCollateral |       |   | CreditCollateral |   |     | NetExposure |  |   | 2 years orless       |   | Between 2 - 5 years |   | Greaterthan 5years |  | Total
|Investment grade    |  | $                              | 894   |   |                  | $ | 166 |             |  | $ | 728                  |   |                     | $ | 554                |  | $     | 94  |  | $ | 80 |  | $ | 728
|Noninvestment grade |  |                                | 196   |   |                  |   | 64  |             |  |   | 132                  |   |                     |   | 102                |  |       | 16  |  |   | 14 |  |   | 132
|                    |  |                                |       |   |                  |   |     |             |  |   |                      |   |                     |   |                    |  |       |     |  |   |    |  |   |    
|Totals              |  | $                              | 1,090 |   |                  | $ | 230 |             |  | $ | 860                  |   |                     | $ | 656                |  | $     | 110 |  | $ | 94 |  | $ | 860
|                    |  |                                |       |   |                  |   |     |             |  |   |                      |   |                     |   |                    |  |       |     |  |   |    |  |   |    
|Investment grade    |  |                                | 82    | % |                  |   | 72  | %           |  |   | 85                   | % |                     |   |                    |  |       |     |  |   |    |  |   |    
|Noninvestment grade |  |                                | 18    | % |                  |   | 28  | %           |  |   | 15                   | % |                     |   |                    |  |       |     |  |   |    |  |   |    



TXU Corp. had exposure
with two counterparties each having exposure greater than 10% of the net exposure of $860 million at March 31, 2005. These two counterparties represent approximately 10% and 11% respectively of the net exposure and are viewed to be a minimal credit
risk. Additionally, approximately 76% of the credit exposure, net of collateral held, has a maturity date of two years or less. TXU Corp. does not anticipate any material adverse effect on its financial position or results of operations as a result
of nonperformance by any customer or counterparty.



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RISK FACTORS THAT MAY AFFECT FUTURE RESULTS



Some important factors, in addition to others specifically addressed in this Managements Discussion and Analysis of
Financial Condition and Results of Operations, that could have a material impact on TXU Corp.s operations, financial results and financial condition, and could cause TXU Corp.s actual results or outcomes to differ materially from any
projected outcome contained in any forward-looking statement in this report, include:



The implementation of performance improvement initiatives identified by management may not produce the desired results and may result in disruptions arising from employee displacements and the rapid pace of changes to
organizational structure and operating practices and processes. Most notably, TXU Corp. is subject to the risk that the joint venture outsourcing arrangement with Capgemini may not produce the desired cost savings as well as potential transition
costs, which would likely be significant, in the event TXU Corp. needed to switch to another vendor if Capgemini failed to perform its obligations to TXU Corp.



ERCOT is the independent system operator that is responsible for maintaining reliable operation of the bulk electric power supply system in the ERCOT
region. Its responsibilities include the clearing and settlement of electricity volumes and related ancillary services among the various participants in the deregulated Texas market. Settlement information is due from ERCOT within two months after
the operating day, and true-up settlements are due from ERCOT within six months after the operating day. As a result, TXU Corp. is subject to settlement adjustments from ERCOT related to prior periods, which may result in charges or credits
impacting future reported results of operations.



TXU
Corp.s businesses operate in changing market environments influenced by various legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the energy industry, including deregulation of the production and
sale of electricity. TXU Corp. will need to adapt to these changes and may face increasing competitive pressure. For example, the Texas electricity market was deregulated as of January 1, 2002, and competition has resulted, and may continue to
result in, declines in customer counts and sales volumes.



TXU
Corp.s businesses are subject to changes in laws (including PURA, the Federal Power Act, as amended, the Atomic Energy Act, as amended, the Public Utility Regulatory Policies Act of 1978, as amended, the Clean Air Act, as amended, and the
Public Utility Holding Company Act of 1935, as amended) and changing governmental policy and regulatory actions (including those of the Commission, the FERC, the EPA and the NRC) with respect to matters including, but not limited to, market
structure and design, operation of nuclear power facilities, construction and operation of other power generation facilities, construction and operation of transmission facilities, acquisition, disposal, depreciation, and amortization of regulated
assets and facilities, recovery of purchased gas and power costs, decommissioning costs, and return on invested capital for TXU Corp.s regulated businesses, and present or prospective wholesale and retail competition. In particular, PURA and
the Commission will be subject to sunset review by the Texas Legislature during this 2005 legislative session. See ERCOT Market Issues and Wholesale Market Design above.



TXU Energy Holdings, along with other market participants, is subject to
oversight by the Commission. In that connection, TXU Energy Holdings and other market participants may be subject to various competition-related rules and regulations, including but not limited to possible price-mitigation rules, as well as rules
related to market behavior.



TXU Corp. is not guaranteed any
rate of return on its capital investments in unregulated businesses. TXU Corp. markets and trades power, including power from its own production facilities, as part of its wholesale markets management operation. TXU Corp.s results of
operations are likely to depend in large part upon prevailing retail rates, which are set in part by regulatory authorities, and market prices for electricity, gas and coal in its regional market and other competitive markets. Market prices may
fluctuate substantially over relatively short periods of time. Demand for electricity can fluctuate dramatically, creating periods of substantial under- or over-supply. During periods of over-supply, prices might be depressed. Also, at times there
may be political pressure, or pressure from regulatory authorities with jurisdiction over wholesale and retail energy commodity and transportation rates, to impose price limitations, bidding rules and other mechanisms to address volatility and other
issues in these markets.



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TXU Corp.s regulated businesses are subject to cost-of-service regulation and annual earnings
oversight. This regulatory treatment does not provide any assurance as to achievement of earnings levels. TXU Electric Deliverys rates are regulated by the Commission based on an analysis of TXU Electric Deliverys costs, as reviewed and
approved in a regulatory proceeding. While rate regulation is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital, there can be no assurance that the Commission will judge all of TXU Electric
Deliverys costs to have been prudently incurred or that the regulatory process in which rates are determined will always result in rates that will produce full recovery of TXU Electric Deliverys costs and the return on invested capital
allowed by the Commission.



Some of the fuel for TXU
Corp.s power production facilities is purchased under short-term contracts or on the spot market. Prices of fuel, including natural gas, may also be volatile, and the price TXU Corp. can obtain for power sales may not change at the same rate
as changes in fuel costs. In addition, TXU Corp. purchases and sells natural gas and other energy related commodities, and volatility in these markets may affect TXU Corp.s costs incurred in meeting its obligations.



Volatility in market prices for fuel and electricity may result from:



| |  |  | severe or unexpected weather conditions,
| | - |  | ----------------------------------------



| |  |  | seasonality,
| | - |  | ------------



| |  |  | changes in electricity usage,
| | - |  | -----------------------------



| |  |  | illiquidity in the wholesale power or other markets,
| | - |  | ----------------------------------------------------



| |  |  | transmission or transportation constraints, inoperability or inefficiencies,
| | - |  | ----------------------------------------------------------------------------



| |  |  | availability of competitively priced alternative energy sources,
| | - |  | ----------------------------------------------------------------



| |  |  | changes in supply and demand for energy commodities,
| | - |  | ----------------------------------------------------



| |  |  | changes in power production capacity and heat rate,
| | - |  | ---------------------------------------------------



| |  |  | outages at TXU Corp.s power production facilities or those of its competitors,
| | - |  | -------------------------------------------------------------------------------



| |  |  | changes in production and storage levels of natural gas, lignite, coal and crude oil and refined products,
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | natural disasters, wars, sabotage, terrorist acts, embargoes and other catastrophic events, and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | federal, state, local and foreign energy, environmental and other regulation and legislation.
| | - |  | ---------------------------------------------------------------------------------------------



All but one of TXU Corp.s facilities for power production are located in the ERCOT region, a market with limited
interconnections to other markets. Electricity prices in the ERCOT region are correlated to gas prices because gas-fired plant is the marginal cost unit during the majority of the year in the ERCOT region. Accordingly, the contribution to earnings
and the value of TXU Corp.s baseload power production is dependent in significant part upon the price of natural gas. TXU Corp. cannot fully hedge the risk associated with dependency on gas because of the expected useful life of TXU
Corp.s power production assets and the size of its position relative to market liquidity.



To manage its near-term financial exposure related to commodity price fluctuations, TXU Corp. routinely enters into contracts to hedge portions of its
purchase and sale commitments, weather positions, fuel requirements and inventories of natural gas, lignite, coal, refined products, and other commodities, within established risk management guidelines. As part of this strategy, TXU Corp. routinely
utilizes fixed-price forward physical purchase and sales contracts, futures, financial swaps and option contracts traded in the over-the-counter markets or on exchanges. However, TXU Corp. can normally cover only a small portion of the exposure of
its assets and positions to market price volatility, and the coverage will vary over time. To the extent TXU Corp. has unhedged positions, fluctuating commodity prices can materially impact TXU Corp.s results of operations and financial
position, either favorably or unfavorably.



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Although TXU Corp. devotes a considerable amount of management time and effort to the establishment of
risk management procedures as well as the ongoing review of the implementation of these procedures, the procedures it has in place may not always be followed or may not always function as planned and cannot eliminate all the risks associated with
these activities. As a result of these and other factors, TXU Corp. cannot predict with precision the impact that risk management decisions may have on its business, results of operations or financial position.



TXU Corp. or one of its subsidiaries has guaranteed or indemnified the
performance of a portion of the obligations of certain subsidiaries, including those involved in hedging and risk management activities. TXU Corp. or its subsidiary, as the case may be, might not be able to satisfy all of these guarantees and
indemnification obligations if they were to come due at the same time.



TXU Corp.s hedging and risk management activities are exposed to the risk that counterparties that owe TXU Corp. money, energy or other commodities as a result of market transactions will not perform their obligations. The likelihood
that certain counterparties may fail to perform their obligations has increased due to financial difficulties, brought on by various factors including improper or illegal accounting and business practices, affecting some participants in the
industry. Some of these financial difficulties have been so severe that certain industry participants have filed for bankruptcy protection or are facing the possibility of doing so. Should the counterparties to these arrangements fail to perform,
TXU Corp. might be forced to acquire alternative hedging arrangements or honor the underlying commitment at then-current market prices. In such event, TXU Corp. might incur losses in addition to amounts, if any, already paid to the counterparties.
ERCOT market participants are also exposed to risks that another ERCOT market participant may default in its obligations to pay ERCOT for power taken in the ancillary services market, in which case such costs, to the extent not offset by posted
security and other protections available to ERCOT, may be allocated to various nondefaulting ERCOT market participants.



The current credit ratings for TXU Corp.s and its subsidiaries long-term debt are investment grade, except for Moodys credit rating for
long-term debt of TXU Corp. (the holding company), which is one notch below investment grade. A rating reflects only the view of a rating agency, and it is not a recommendation to buy, sell or hold securities. Any rating can be revised upward or
downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change. If S&P, Moodys or Fitch were to downgrade TXU Corp.s and/or its subsidiaries long-term ratings, particularly below
investment grade, borrowing costs would increase, the potential pool of investors and funding sources would likely decrease and liquidity demands would be triggered by the terms of a number of commodity contracts, leases and other agreements.



Most of TXU Corp.s large customers, suppliers and
counterparties require sufficient creditworthiness in order to enter into transactions. If TXU Corp. subsidiaries ratings were to decline, particularly below investment grade, costs to operate the power business would increase because
counterparties may require the posting of collateral in the form of cash-related instruments, or counterparties may decline to do business with TXU Corp.s subsidiaries.



In addition, as discussed in the 2004 Form 10-K, the terms of certain of TXU Corp.s financing and other arrangements
contain provisions that are specifically affected by changes in credit ratings and could require the posting of collateral, the repayment of indebtedness or the payment of other amounts.



The operation of power production and energy transportation facilities involves many risks, including start up risks,
breakdown or failure of facilities, lack of sufficient capital to maintain the facilities, the dependence on a specific fuel source or the impact of unusual or adverse weather conditions or other natural events, as well as the risk of performance
below expected levels of output or efficiency, the occurrence of any of which could result in lost revenues and/or increased expenses. A significant portion of TXU Corp.s facilities was constructed many years ago. In particular, older
generating equipment, even if maintained in accordance with good engineering practices, may require significant capital expenditures to keep it operating at peak efficiency. The risk of increased maintenance and capital expenditures arises from (a)
increased starting and stopping of generation equipment due to the volatility of the competitive market, (b) any unexpected failure to produce



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power, including failure caused by breakdown or forced outage, and (c) repairing damage to facilities due to storms,
natural disasters, wars, terrorist acts and other catastrophic events. Further, TXU Corp.s ability to successfully and timely complete capital improvements to existing facilities or other capital projects is contingent upon many variables and
subject to substantial risks. Should any such efforts be unsuccessful, TXU Corp. could be subject to additional costs and/or the write-off of its investment in the project or improvement.



Insurance, warranties or performance guarantees may not cover all or any of the lost revenues or increased expenses,
including the cost of replacement power. Likewise, TXU Corp.s ability to obtain insurance, and the cost of and coverage provided by such insurance, could be affected by events outside its control.



The ownership and operation of nuclear facilities, including TXU Corp.s
ownership and operation of the Comanche Peak generation plant, involve certain risks. These risks include: mechanical or structural problems; inadequacy or lapses in maintenance protocols; the impairment of reactor operation and safety systems due
to human error; the costs of storage, handling and disposal of nuclear materials; limitations on the amounts and types of insurance coverage commercially available; and uncertainties with respect to the technological and financial aspects of
decommissioning nuclear facilities at the end of their useful lives. The following are among the more significant of these risks:



| |  |  | Operational Risk  Operations at any nuclear power production plant could degrade to the point where the plant would have to be shut down. Over the next three years,
certain equipment at Comanche Peak is expected to be replaced. The cost of these actions is currently expected to be material and could result in extended outages. If this were to happen, the process of identifying and correcting the causes of the
operational downgrade to return the plant to operation could require significant time and expense, resulting in both lost revenue and increased fuel and purchased power expense to meet supply commitments. Rather than incurring substantial costs to
restart the plant, the plant may be shut down. Furthermore, a shut-down or failure at any other nuclear plant could cause regulators to require a shut-down or reduced availability at Comanche Peak.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Regulatory Risk The NRC may modify, suspend or revoke licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations
under it or the terms of the licenses of nuclear facilities. Unless extended, the NRC operating licenses for Comanche Peak Unit 1 and Unit 2 will expire in 2030 and 2033, respectively. Changes in regulations by the NRC could require a substantial
increase in capital expenditures or result in increased operating or decommissioning costs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Nuclear Accident Risk Although the safety record of Comanche Peak and other nuclear reactors generally has been very good, accidents and other unforeseen
problems have occurred both in the US and elsewhere. The consequences of an accident can be severe and include loss of life and property damage. Any resulting liability from a nuclear accident could exceed TXU Corp.s resources, including
insurance coverage.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



TXU Corp. is subject to
extensive environmental regulation by governmental authorities. In operating its facilities, TXU Corp. is required to comply with numerous environmental laws and regulations, and to obtain numerous governmental permits. TXU Corp. may incur
significant additional costs to comply with these requirements. If TXU Corp. fails to comply with these requirements, it could be subject to civil or criminal liability and fines. Existing environmental regulations could be revised or reinterpreted,
new laws and regulations could be adopted or become applicable to TXU Corp. or its facilities, and future changes in environmental laws and regulations could occur, including potential regulatory and enforcement developments related to air
emissions.



TXU Corp. may not be able to obtain or maintain all
required environmental regulatory approvals. If there is a delay in obtaining any required environmental regulatory approvals or if TXU Corp. fails to obtain, maintain or comply with any such approval, the operation of its facilities could be
stopped or become subject to additional costs. Further, at some of TXU Corp.s older facilities, including baseload lignite and coal plants, it may be uneconomical for TXU Corp. to install the necessary equipment, which may cause TXU Corp. to
shut down those facilities.



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In addition, TXU Corp. may be responsible for any on-site liabilities associated with the environmental
condition of facilities that it has acquired or developed, regardless of when the liabilities arose and whether they are known or unknown. In connection with certain acquisitions and sales of assets, TXU Corp. may obtain, or be required to provide,
indemnification against certain environmental liabilities. Another party could fail to meet its indemnification obligations to TXU Corp.



While TXU Corp. may now offer prices other than the price-to-beat, it is obligated to offer the price-to-beat rate to its residential and small business
customers in its historical service territory through January 1, 2007. The results of TXU Corp.s retail electric operations in its historical service territory are largely dependent upon the amount of headroom available to TXU Corp. in its
price-to-beat rate. The margin or headroom available in the price-to-beat rate for any REP equals the difference between the price-to-beat rate and the sum of delivery charges and the price that REP pays for power. Headroom may be a
positive or a negative number. Since headroom is dependent, in part, on power production and purchase costs, TXU Corp. does not know nor can it estimate the amount of headroom that it will have in its price-to-beat rate. There is no assurance that
future adjustments to TXU Corp.s price-to-beat rate will be adequate to cover future increases in its costs of electricity to serve its price-to-beat rate customers or that TXU Corp.s price-to-beat rate will not result in negative
headroom in the future. In addition, TXU Corp. faces competition for customers within its historical service territory. Such competitors may be larger or better capitalized or have well known brand recognition. Such competitors may also offer prices
that are too low to be sustainable over the long-term, but attract customers away from TXU Corp.



In most retail electric markets outside its historical service territory, TXU Corp.s principal competitor may be the retail affiliate of the local
incumbent utility company. The incumbent retail affiliates have the advantage of long-standing relationships with their customers. In addition to competition from the incumbent utilities and their affiliates, TXU Corp. may face competition from a
number of other energy service providers, or other energy industry participants, who may develop businesses that will compete with TXU Corp. and nationally branded providers of consumer products and services. Some of these competitors or potential
competitors may be larger and better capitalized than TXU Corp. If there is inadequate margin in these retail electric markets, it may not be profitable for TXU Corp. to enter these markets.



TXU Corp. depends on transmission and distribution facilities owned and
operated by other utilities, as well as its own such facilities, to deliver the electricity it produces and sells to consumers, as well as to other REPs. If transmission capacity is inadequate, TXU Corp.s ability to sell and deliver
electricity may be hindered, it may have to forgo sales or it may have to buy more expensive wholesale electricity that is available in the capacity-constrained area. In particular, during some periods transmission access is constrained to some
areas of the Dallas-Fort Worth metroplex. TXU Corp. expects to have a significant number of customers inside these constrained areas. The cost to provide service to these customers may exceed the cost to provide service to other customers, resulting
in lower headroom. In addition, any infrastructure failure that interrupts or impairs delivery of electricity to TXU Corp.s customers could negatively impact the satisfaction of its customers with its service.



TXU Corp. offers its customers a bundle of services that include, at a
minimum, the electric commodity itself plus transmission, distribution and related services. The prices TXU Corp. charges for this bundle of services or for the various components of the bundle, either of which may be fixed by contract with the
customer for a period of time, could fall below TXU Corp.s underlying cost to obtain the commodities or services.



Research and development activities are ongoing to improve existing and alternative technologies to produce electricity, including gas turbines, fuel
cells, microturbines and photovoltaic (solar) cells. It is possible that advances in these or other alternative technologies will reduce the costs of electricity production from these technologies to a level that will enable these technologies to
compete effectively with electricity production from traditional power plants like TXU Corp.s. While demand for electric energy services is generally increasing



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throughout the US, the rate of construction and development of new, more efficient power production facilities may exceed increases in demand in some
regional electric markets. Consequently, where TXU Corp. has facilities, the market value of TXU Corp.s power production and/or energy transportation facilities could be significantly reduced. Also, electricity demand could be reduced by
increased conservation efforts and advances in technology, which could likewise significantly reduce the value of TXU Corp.s facilities. Changes in technology could also alter the channels through which retail electric customers buy
electricity.



TXU Corp. is a holding company and conducts its
operations primarily through wholly-owned subsidiaries. Substantially all of TXU Corp.s consolidated assets are held by these subsidiaries. Accordingly, TXU Corp.s cash flows and ability to meet its obligations and to pay dividends are
largely dependent upon the earnings of its subsidiaries and the distribution or other payment of such earnings to TXU Corp. in the form of distributions, loans or advances, and repayment of loans or advances from TXU Corp. The subsidiaries are
separate and distinct legal entities and have no obligation to provide TXU Corp. with funds for its payment obligations, whether by dividends, distributions, loans or otherwise.



Because TXU Corp. is a holding company, its obligations to its creditors are structurally subordinated to all existing and
future liabilities and existing and future preferred stock of its subsidiaries. Therefore, TXU Corp.s rights and the rights of its creditors to participate in the assets of any subsidiary in the event that such a subsidiary is liquidated or
reorganized are subject to the prior claims of such subsidiarys creditors and holders of its preferred stock. To the extent that TXU Corp. may be a creditor with recognized claims against any such subsidiary, its claims would still be subject
to the prior claims of such subsidiarys creditors to the extent that they are secured or senior to those held by TXU Corp. Subject to restrictions contained in TXU Corp.s other financing arrangements, TXU Corp.s subsidiaries may
incur additional indebtedness and other liabilities.



The
inability to raise capital on favorable terms, particularly during times of uncertainty in the financial markets, could impact TXU Corp.s ability to sustain and grow its businesses, which are capital intensive, and would increase its capital
costs. TXU Corp. relies on access to financial markets as a significant source of liquidity for capital requirements not satisfied by cash on hand or operating cash flows. TXU Corp.s access to the financial markets could be adversely impacted
by various factors, such as:



| |  |  | changes in credit markets that reduce available credit or the ability to renew existing liquidity facilities on acceptable terms;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | inability to access commercial paper markets;
| | - |  | ---------------------------------------------



| |  |  | a deterioration of TXU Corp.s credit or the credit of its subsidiaries or a reduction in TXU Corp.s credit ratings or the credit ratings of its subsidiaries;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | extreme volatility in TXU Corp.s markets that increases margin or credit requirements;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | a material breakdown in TXU Corp.s risk management procedures;
| | - |  | ---------------------------------------------------------------



| |  |  | prolonged delays in billing and payment resulting from delays in switching customers from one REP to another; and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | the occurrence of material adverse changes in TXU Corp.s businesses that restrict TXU Corp.s ability to access its liquidity facilities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



A lack of necessary capital and cash reserves could adversely impact the
evaluation of TXU Corp.s credit worthiness by counterparties and rating agencies, and would likely increase its capital costs. Further, concerns on the part of counterparties regarding TXU Corp.s liquidity and credit could limit its
wholesale markets management activities.



As a result of the
energy crisis in California during 2001, the recent volatility of natural gas prices in North America, the bankruptcy filing by Enron Corporation, accounting irregularities of public companies, and investigations by governmental authorities into
energy trading activities, companies in the regulated and nonregulated utility businesses have been under a generally increased amount of public and regulatory scrutiny. Accounting irregularities at certain companies in the industry have caused
regulators and legislators to review current accounting practices and financial disclosures. The capital markets and ratings agencies also have



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increased their level of scrutiny. Additionally, allegations against various energy trading companies of round
trip or wash transactions, which involve the simultaneous buying and selling of the same amount of power at the same price and delivery location and provide no true economic benefit, power market manipulation and inaccurate power
and commodity price reporting have had a negative effect on the industry. TXU Corp. believes that it is complying with all applicable laws, but it is difficult or impossible to predict or control what effect events and investigations in the energy
industry may have on TXU Corp.s financial condition or access to the capital markets. Additionally, it is unclear what laws and regulations may develop, and TXU Corp. cannot predict the ultimate impact of any future changes in accounting
regulations or practices in general with respect to public companies, the energy industry or its operations specifically. Any such new accounting standards could negatively impact reported financial results.



TXU Corp. is subject to costs and other effects of legal and administrative
proceedings, settlements, investigations and claims. Since October 2002, a number of lawsuits (some of which have been settled but are still subject to court approval) have been filed in federal and state courts in Texas against TXU Corp. and
various of its officers, directors and underwriters. Such current and potential legal proceedings could result in payments of judgment or settlement amounts. If the settlement agreement between TXU Corp. and the creditors of TXU Europe does not
become final and binding, potential claims by such creditors could be material.



The market price of TXU Corp.s common stock has been volatile in the past, and a variety of factors could cause the price to fluctuate in the future. In addition to the matters discussed above and in TXU
Corp.s other filings under the Securities Exchange Act of 1934, as amended, the following could impact the market price for TXU Corp.s common stock:



| |  |  | developments related to TXU Corp.s businesses;
| | - |  | -----------------------------------------------



| |  |  | fluctuations in TXU Corp.s results of operations;
| | - |  | --------------------------------------------------



| |  |  | the level of dividends and share repurchases;
| | - |  | ---------------------------------------------



| |  |  | TXU Corp.s debt to equity ratios and other credit metrics;
| | - |  | -----------------------------------------------------------



| |  |  | effect of significant events relating to the energy sector in general;
| | - |  | ----------------------------------------------------------------------



| |  |  | sales of TXU Corp. securities into the marketplace;
| | - |  | ---------------------------------------------------



| |  |  | general conditions in the industry and the energy markets in which TXU Corp. is a participant;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the worldwide economy;
| | - |  | ----------------------



| |  |  | an outbreak of war or hostilities;
| | - |  | ----------------------------------



| |  |  | a shortfall in revenues or earnings compared to securities analysts expectations;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | changes in analysts recommendations or projections; and
| | - |  | --------------------------------------------------------



| |  |  | actions by credit rating agencies.
| | - |  | ----------------------------------



Fluctuations in the market price of TXU Corp.s common stock may be unrelated to TXU Corp.s performance. General market declines or market
volatility could adversely affect the price of TXU Corp.s common stock and the current market price may not be indicative of future market prices.



The issues and associated risks and uncertainties described above are not the only ones TXU Corp. may face. Additional issues may arise or become material
as the energy industry evolves.



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FORWARD-LOOKING STATEMENTS



This report and other presentations made by TXU Corp. contain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that are included in this report, or made in presentations, in response to questions or otherwise, that address activities,
events or developments that TXU Corp. expects or anticipates to occur in the future, including such matters as projections, capital allocation and cash distribution policy, future capital expenditures, business strategy, competitive strengths,
goals, future acquisitions or dispositions, development or operation of power production assets, market and industry developments and the growth of TXU Corp.s business and operations (often, but not always, through the use of words or phrases
such as will likely result, are expected to, will continue, is anticipated, estimated, projection, target, outlook), are forward-looking statements.
Although TXU Corp. believes that in making any such forward-looking statement its expectations are based on reasonable assumptions, any such forward-looking statement involves uncertainties and is qualified in its entirety by reference to the
discussion of risk factors discussed above under RISK FACTORS THAT MAY AFFECT FUTURE RESULTS and the following important factors, among others, that could cause the actual results of TXU Corp. to differ materially from those projected in
such forward-looking statements:



| |  |  | prevailing governmental policies and regulatory actions, including those of the FERC, the Commission, the RRC and the NRC, with respect to:
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | allowed rates of return;
| | - |  | ------------------------



| |  |  | industry, market and rate structure;
| | - |  | ------------------------------------



| |  |  | purchased power and recovery of investments;
| | - |  | --------------------------------------------



| |  |  | operations of nuclear generating facilities;
| | - |  | --------------------------------------------



| |  |  | acquisitions and disposal of assets and facilities;
| | - |  | ---------------------------------------------------



| |  |  | operation and construction of facilities;
| | - |  | -----------------------------------------



| |  |  | decommissioning costs;
| | - |  | ----------------------



| |  |  | present or prospective wholesale and retail competition;
| | - |  | --------------------------------------------------------



| |  |  | changes in tax laws and policies; and
| | - |  | -------------------------------------



| |  |  | changes in and compliance with environmental and safety laws and policies;
| | - |  | --------------------------------------------------------------------------



| |  |  | continued implementation of, and sunset provisions regarding, the 1999 Restructuring Legislation;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | legal and administrative proceedings and settlements;
| | - |  | -----------------------------------------------------



| |  |  | general industry trends;
| | - |  | ------------------------



| |  |  | power costs (including repair costs) and availability;
| | - |  | ------------------------------------------------------



| |  |  | weather conditions and other natural phenomena, and acts of sabotage, wars or terrorist activities;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | unanticipated population growth or decline, and changes in market demand and demographic patterns;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | changes in business strategy, development plans or vendor relationships;
| | - |  | ------------------------------------------------------------------------



| |  |  | TXU Corp.s ability to implement the initiatives that are part of its restructuring, operational improvement and cost reduction program, and the terms upon which those
initiatives are executed;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition for retail and wholesale customers;
| | - |  | -----------------------------------------------



| |  |  | access to adequate transmission facilities to meet changing demands;
| | - |  | --------------------------------------------------------------------



| |  |  | pricing and transportation of crude oil, natural gas and other commodities;
| | - |  | ---------------------------------------------------------------------------



| |  |  | unanticipated changes in interest rates, commodity prices, rates of inflation or foreign exchange rates;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | unanticipated changes in operating expenses, liquidity needs and capital expenditures;
| | - |  | --------------------------------------------------------------------------------------



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| |  |  | commercial bank market and capital market conditions;
| | - |  | -----------------------------------------------------



| |  |  | competition for new energy development and other business opportunities;
| | - |  | ------------------------------------------------------------------------



| |  |  | inability of various counterparties to meet their obligations with respect to TXU Corp.s financial instruments;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | changes in technology used by and services offered by TXU Corp.;
| | - |  | ----------------------------------------------------------------



| |  |  | significant changes in TXU Corp.s relationship with its employees, including the availability of qualified personnel, and the potential adverse effects if labor disputes or
grievances were to occur;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant changes in critical accounting policies material to TXU Corp.; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | actions by credit rating agencies.
| | - |  | ----------------------------------



Any forward-looking statement speaks only as of the date on which it is made, and TXU Corp. undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for TXU Corp. to predict all of them; nor can TXU
Corp. 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.



ITEM 4. CONTROLS AND PROCEDURES



An evaluation was performed under the supervision and with the participation of TXU Corp.s management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the
disclosure controls and procedures in effect as of the end of the current period included in this quarterly report. Based on the evaluation performed, TXU Corp.s management, including the principal executive officer and principal financial
officer, concluded that the disclosure controls and procedures were effective. During the most recent fiscal quarter covered by this quarterly report, there has been no change in TXU Corp.s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, TXU Corp.s internal control over financial reporting.



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PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



Reference is made to the discussion in Note 6 regarding legal proceedings.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



ISSUER PURCHASES OF EQUITY SECURITIES



In March 2005, TXU Corp. repurchased 1,000,000 units associated with its Series L equity-linked debt securities at an average price per unit of $36.04.
These securities were purchased in one or more privately negotiated transactions. Also see Note 6 to Financial Statements for disclosure regarding the accelerated share repurchase program.



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ITEM 6. EXHIBITS



(a) Exhibits
filed or furnished as part of Part II are:



|         |  |                                                     |  |           |  |   |  |                                                                                                                                                                                                                                                                                                         
|-------- |  | --------------------------------------------------- |  | --------- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |  | Previously Filed* With File
Number                  |  | AsExhibit |  |   |  |                                                                                                                                                                                                                                                                                                         
|(10)     |  | Material Contracts.                                 |  |           |  |   |  |                                                                                                                                                                                                                                                                                                         
|         |  |                                                     |  |          
|10(a)    |  | 1-12833 Form 8-K filed April 1, 2005                |  |           |  |  |  | $3.5 billion Amended and Restated Credit Agreement, dated March 31, 2005, by and among TXU Electric Delivery, TXU Energy Holdings, JPMorgan Chase Bank, N.A., Citibank, N.A., Wachovia Bank,
National Association, Bank of America, N.A., Calyon New York Branch and certain other lenders party thereto
|         | 
|(15)     |  | Letter re: Unaudited Interim Financial Information.
|         |  |                                                     |  |          
|15       |  |                                                     |  |           |  |  |  | Letter from independent registered public accounting firm as to unaudited interim financial information.                                                                                                                                                                                                
|         | 
|(31)     |  | Rule 13a  14(a)/15d  14(a) Certifications.       
|         |  |                                                     |  |          
|31(a)    |  |                                                     |  |           |  |  |  | Certification of C. John Wilder, President and Chief Executive of TXU Corp., pursuant to Rule 13a-14(a)/15d  14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.                                                                       
|         |  |                                                     |  |          
|31(b)    |  |                                                     |  |           |  |  |  | Certification of Kirk R. Oliver, Chief Financial Officer of TXU Corp., pursuant to Rule 13a  14(a)/15d  14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                                                                           
|         |  |                                                     | 
|(32)     |  | Section 1350 Certifications.                        |  |           |  |  
|         |  |                                                     |  |          
|32(a)    |  |                                                     |  |           |  |  |  | Certification of C. John Wilder, President and Chief Executive of TXU Corp., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                  
|         |  |                                                     |  |          
|32(b)    |  |                                                     |  |           |  |  |  | Certification of Kirk R. Oliver, Chief Financial Officer of TXU Corp., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                        
|         |  |                                                     | 
|(99)     |  | Additional Exhibits.                                |  |           |  |  
|         |  |                                                     |  |          
|99       |  |                                                     |  |           |  |  |  | Condensed Statements of Consolidated Income  Twelve Months Ended March 31, 2005.                                                                                                                                                                                                                       

---

|* | Incorporated herein by reference.
|- | ---------------------------------



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SIGNATURE



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



TXU CORP.By

/s/ Stan SzlauderbachStan SzlauderbachSenior Vice President and Controller




Date: May 9, 2005



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