SECURITIES AND EXHANGE COMMISSION

                    Washington, D.C.  20549



                           FORM 10-Q


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



         FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001



                            - OR -

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


              Commission File Number 001 - 15709


                      TXU Europe Limited




  Incorporated under the                      I.R.S. Employer Identification
Laws of England and Wales                          No. 98-0188080






 The Adelphi, 1-11 John Adam Street, London, England WC2N 6HT
                      011-44-207-879-8081



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 ____



  Common Stock outstanding at August 8, 2001 - 2,455,705,299
shares, at US$1 par value, and 100 deferred shares, at pounds 1
                          par value.


<page>

TABLE OF CONTENTS


Part I. Financial Information
                                                                   Page

       Item 1.  Financial Statements

            Condensed Statements of Consolidated Income -
            Three and Six Months Ended June 30, 2001 and 2000 ....     1

            Condensed  Statements of Consolidated Comprehensive
            Income -
            Three  and Six Months Ended June 30, 2001 and  2000 ..     2

            Condensed Statements of Consolidated Cash Flows -
            Six Months Ended June 30, 2001 and 2000 ..............     3

            Condensed Consolidated Balance Sheets -
            June 30, 2001 and December 31, 2000 ..................     4

            Notes to Financial Statements ........................     5

            Independent Accountants' Report ......................    15

       Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations .....    16


       Item 3. Quantitative and Qualitative Disclosures About
               Market Risk .......................................    26


Part II. Other Information

       Item 1.Legal Proceedings ..................................    26

       Item 6.Exhibits and Reports on Form 8-K ...................    26

Signatures .......................................................    27



<page>

                    PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
<table>
<caption>
              TXU EUROPE LIMITED AND SUBSIDIARIES
          CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                          (Unaudited)

                                     Three Months Ended   Six Months Ended
                                           June 30,           June 30,
                                     -------------------  -----------------
                                       2001       2000     2001      2000
                                      ------     -----    -------    -----
                                                (pounds  million)

                                   <c>        <c>      <c>        <c>
Operating Revenues ...............    1,902        821    4,207      1,972
                                     ------     ------    -----     ------
Operating Expenses
Energy purchased for resale and
  fuel consumed ..................    1,487        581    3,324      1,344
Operation and maintenance ........      233         96      447        273
Depreciation and other
  amortization ...................       40         35       85         73
Goodwill amortization ............       31         22       62         44
                                     ------     ------    -----     ------
Total operating expenses .........    1,791        734    3,918      1,734
                                     ------     ------    -----     ------
Operating Income .................      111         87      289        238
Other Income  - Net ..............       58         43       65         44
                                     ------     ------    -----     ------
Income Before Interest, Income
  Taxes, Distributions and Minority
  Interest .......................      169        130      354        282
Interest Income ..................       13         16       25         32
Interest Expense .................       96         91      201        180
                                     ------     ------    -----     ------
Income Before Income Taxes,
  Cumulative Effect of Change
  in Accounting,  Distributions
  and Minority Interest ..........       86         55      178        134
Income Tax Expense ...............       35         18       73         52
                                     ------     ------    -----     ------
Income Before Cumulative Effect
  of Change in Accounting,
  Distributions and Minority
  Interest .......................       51         37      105         82
Cumulative Effect on Prior
  Years (to December 31, 1999)
  of Change in Depreciation
  Method (Net of pounds 3
  million tax effect).............        -          -        -          7
Distributions on Preferred
  Securities of Subsidiary
  Perpetual Trust ................       (2)        (2)      (5)        (3)
Minority Interest ................       (7)        (3)     (17)        (8)
                                     ------     ------    -----     ------
Net Income .......................       42         32       83         78
                                     ======     ======    =====     ======

<fn>
See Notes to Financial Statements.
</fn>
</table>
                                        1

<page>
              TXU EUROPE LIMITED AND SUBSIDIARIES
   CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
                          (Unaudited)
<table>
<caption>

                                                  Three Months    Six  Months
                                                     Ended           Ended
                                                    June 30,        June 30,
                                                 --------------  --------------
                                                  2001    2000    2001    2000
                                                 ------  ------  -------  -----
                                                       (pounds  million)

                                                <c>      <c>      <c>    <c>
Net Income  ...............................          42      32       83     78
                                                 -------  ------  -------  -----
Other Comprehensive Income (Loss) -
  Net change during period, net of tax
    effects:
  Investments classified as available
    for sale:
    Unrealized holding gains ..............           -       7       38     41
    Reclassification of net gain
      realized on sale of investment in
      Hidrocantabrico to other income .....         (35)      -      (35)     -
  Cumulative currency translation
    adjustment ............................          (4)      2       (3)     1
  Cash flow hedges (under SFAS No. 133):
    Cumulative transition adjustment as
      of January 1, 2001 ..................           -       -      (72)     -
    Discontinued cash flow hedges .........           7       -        7      -
    Net change in fair value of
      derivative gains (losses) ...........          (3)      -      (18)     -
    Amount realized in earnings during
      the period ..........................          30       -       36      -
                                                 ------  ------  -------  -----
    Total .................................          (5)      9      (47)    42
                                                 ------  ------  -------  -----
Comprehensive Income ......................          37      41       36    120
                                                 ======  ======  =======  =====

<fn>
See Notes to Financial Statements.
</fn>
</table>


                                        2

<page>
<table>
<caption>
              TXU EUROPE LIMITED AND SUBSIDIARIES
        CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
                          (Unaudited)

                                                   Six Months Ended
                                                        June 30,
                                                 --------------------
                                                   2001        2000
                                                  ------      ------
                                                    (pounds million)

                                                <c>        <c>
Cash Flows - Operating Activities
  Net income .................................        83          78
  Adjustments to reconcile net income to
    cash provided by operating activities:
    Cumulative effect of change in
      accounting principle ...................         -         (10)
    Less - Gain on sale of assets ............       (59)        (46)
    Depreciation and amortization ............       147         117
    Deferred income taxes ....................        60          33
    Minority interest ........................        17           8
    Changes in merchant energy trading
      assets and liabilities .................       (48)          -
    Changes in operating assets and
      liabilities ............................      (138)         12
    Other.....................................         5         (36)
                                                   ------     ------
      Cash provided by operating
        activities ...........................        67         156
                                                  ------      ------
Cash Flows - Investing Activities
  Acquisition of business ....................      (150)          -
  Investments ................................       (42)       (138)
  Capital expenditures .......................      (108)        (95)
  Proceeds from sale of investments and
    other assets .............................       432          72
  Other.......................................         -          (6)
                                                  ------      ------
    Cash provided by (used in)
      investing activities ...................       132        (167)
                                                  ------      ------
Cash Flows - Financing Activities
  Net borrowings under the:
  Sterling credit facility - Tranche B........        84         206
  EMTN Note ..................................         -         225
  Other long-term debt .......................        23          43
  Issuance of preferred securities of
    subsidiary perpetual trust ...............         -          95
  Retirements of:
    Sterling credit facility - Tranche B .....       (87)       (400)
    Other long-term debt .....................      (388)       (207)
  Change in notes payable - banks and
    other short-term loans ...................      (298)        153
  Distributions on preferred securities
    of subsidiary perpetual trust ............        (3)          -
  Dividends paid on minority interest.........        (3)          -
  Debt financing costs .......................        (1)         (6)
                                                  ------      ------
    Cash (used for) provided by financing
      activities .............................      (673)        109
                                                  ------      ------
Effect of Exchange Rates on Cash and
  Cash Equivalents ...........................        (1)         (1)
                                                  ------      ------
Net Change in Cash and Cash Equivalents.......      (475)         97

Cash and Cash Equivalents - Beginning Balance.       663         285
                                                  ------      ------
Cash and Cash Equivalents - Ending Balance ...       188         382
                                                  ======      ======

<fn>
See Notes to Financial Statements.
</fn>
</table>
                                        3

<page>
<table>
<caption>

              TXU EUROPE LIMITED AND SUBSIDIARIES
             CONDENSED CONSOLIDATED BALANCE SHEETS

                                                June 30,    December
                                                  2001        31,
                                                              2000
                                               (Unaudited)
                                               ----------- ---------
                                                 (pounds  million)

                                              <c>         <c>
ASSETS
Current Assets
  Cash and cash equivalents ..............           188        663
  Accounts receivable ....................           788        743
  Inventories - at average cost ..........           112         72
  Merchant energy trading assets .........           547        585
  Prepayments and other current assets ...           132         97
                                              ----------  ---------
    Total current assets .................         1,767      2,160
                                              ----------  ---------
Investments
  Restricted cash.........................           729        672
  Other...................................           417        695
                                              ----------  ---------
    Total investments ....................         1,146      1,367
                                              ----------  ---------
Property, Plant and Equipment - Net ......         2,882      2,781
Goodwill .................................         3,991      3,945
Merchant Energy Trading Assets ...........           276        121
Derivative Assets ........................           242          -
Deferred Debits and Other Assets .........           481        670
                                              ----------  ---------
      Total ..............................        10,785     11,044
                                              ==========  =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
  Notes payable - banks and short-term
    loans on accounts receivable .........           230        530
  Long-term debt due currently ...........           502        862
  Accounts payable:
    Trade ................................           748        712
    Affiliates ...........................            53         52
  Merchant energy trading liabilities ....           442        571
  Interest and taxes accrued .............            56         78
  Other current liabilities ..............           281        166
                                              ----------  ---------
    Total current liabilities ............         2,312      2,971
                                              ----------  ---------
Accumulated Deferred Income Taxes ........           506        467
Provision for Unfavorable Contracts ......           516        573
Merchant Energy Trading Liabilities ......           269         81
Derivative Liabilities ...................           119          -
Other Deferred Credits and Noncurrent
  Liabilities ............................           189        320
Long-term Debt, Less Amounts due
  Currently...............................         4,634      4,480
Preferred Securities of Subsidiary
  Perpetual Trust ........................            95         95
Minority Interest ........................           310        258
Contingencies (Note 7 )
Shareholder's Equity
  Common stock (authorized  - 3,000,000,000
    shares at US$1 par and 100 deferred
    shares at pounds 1 par; issued and
    outstanding -  2,455,705, 299 shares and
    100 deferred shares) .................         1,467      1,467
  Retained earnings ......................           416        333
  Accumulated other comprehensive income
    (loss)................................           (48)        (1)
                                              ----------  ---------
    Total shareholder's equity ...........         1,835      1,799
                                              ----------  ---------
      Total ..............................        10,785     11,044
                                              ==========  =========
<fn>
See Notes to Financial Statements.
</fn>
</table>
                                        4

<page>
                    TXU EUROPE LIMITED
               Notes to Financial Statements


1.   BUSINESS, ACQUISITIONS AND DISPOSITIONS

Business

   TXU  Europe  Limited  (TXU Europe) is an  indirect,  wholly-
owned  subsidiary of TXU Corp., a Texas corporation.  TXU Corp.
is  a  global energy services company that engages in  electric
and  natural  gas  services, electricity  generation,  merchant
energy    trading,    energy   marketing,   energy    delivery,
telecommunications,   and   other   energy-related    services,
primarily in the United States (US), Europe and Australia.  TXU
Europe is a holding company for TXU Corp.'s United Kingdom (UK)
and  other  European  operations. Almost all  of  TXU  Europe's
operating  income is derived from, and consolidated assets  are
held by, TXU Europe Group plc (TXU Europe Group) and TXU Europe
Group's subsidiaries.

   TXU  Europe  uses a single energy business concept  for  the
management of its energy activities in a consistent  manner  in
its  different  geographical areas.  There  are  two  reporting
operating segments for TXU Europe:

   ENERGY  -  which consists of the energy retail business  and
      the  portfolio  trading and power  business.  The  single
      energy  business  manages  the  integrated  portfolio  of
      generation assets and contracts and retail customer  base
      within  two  separate geographical areas  -  the  UK  and
      continental  Europe (which comprises Central Europe,  the
      Nordic region, Iberia and Germany); and

   NETWORKS  -  which owns, manages and, through its 50%  owned
      networks  management  joint venture  (24seven),  operates
      its electricity distribution system in the UK.

Acquisitions

   On  January 8, 2001, TXU Europe completed the acquisition of
51% of Stadtwerke Kiel AG (Kiel AG) for pounds 145 million. The
acquisition of Kiel AG was accounted for as a purchase business
combination.  At the date of acquisition, Kiel AG had  sterling
equivalent  assets  of  pounds 121 million and  liabilities  of
pounds  82 million.  The process of determining the fair  value
of  the  assets  and liabilities of Kiel AG  continues  but  is
expected  to  be  completed within one year of the  acquisition
date.  TXU Europe's preliminary estimate of goodwill is  pounds
106  million,  which  is being amortized over  40  years.  This
amount is subject to further revision as additional information
on  the  fair value of assets acquired and liabilities  assumed
becomes  available. The results of operations of  Kiel  AG  are
reflected  in  the consolidated financial statements  from  the
January  8,  2001 acquisition date.  Pro forma information  for
the  six  months  ended June 30, 2001 and 2000, reflecting  the
acquisition  of  Kiel AG, would not be significantly  different
from reported amounts.

   Under  the  terms of the purchase agreement, TXU Europe  has
the  unilateral  right to make further capital  investments  in
Kiel AG for specified business development purposes and may, in
the process, acquire additional shares, in a new share offering
that  is made to all shareholders.  If the City of Kiel chooses
not to participate in such an offering, its current holdings of
49%  of Kiel AG could be diluted down to a residual holding  of
25.1%.

   The   purchase  agreement  further  provides  that  if   the
holdings of the City of Kiel exceed 25.1% on the later date  of
January  8, 2006 or five years after participation by the  City
of  Kiel  in a new capital issue, the City of Kiel may  require
TXU  Europe  to purchase all, but not less than all,  of  those
holdings in excess of 25.1%.  The City of Kiel's option may  be
exercised   during  the  two  year  period  after  it   becomes
exercisable  at  a  price per share equal  to  the  fair  value
(commercial value) of a Kiel AG share on the exercise date,  as
independently assessed by an investment bank.

   On  May  1, 2001, Kiel AG acquired all of the share  capital
of  Ares  Energie  GmbH (Ares), based in Berlin,  Germany,  for
approximately  24  million Deutsche Marks (pounds  8  million).
Ares  is  an electricity retailer, offering energy services  to
both  business  customers and residential customers  throughout
Germany.   At the date of acquisition, Ares had 110,000  active
                                5

<page>
customers.  Pro forma information for the six months ended June
30,  2001  and 2000, reflecting the acquisition of Ares,  would
not be significantly different from reported amounts.

   In  August 2000, TXU Europe purchased United Utilities plc's
retail  energy  supply business, Norweb Energi (a  division  of
Norweb plc), for total consideration, including direct costs of
the acquisition, of pounds 340 million. In the transaction, TXU
Europe  assumed certain of Norweb Energi's obligations.   These
include  Norweb Energi's power purchase agreements, which  have
been integrated into TXU Europe's energy portfolio.

   The  acquisition  of Norweb Energi was accounted  for  as  a
purchase business combination.  The latest estimate of goodwill
is  pounds 622 million, which is being amortized over 20 years.
This  amount  is  subject  to further  revision  as  additional
information becomes available, primarily relating to exit costs
and   other  liabilities  assumed  at  acquisition.  The  final
determination   of  the  purchase  accounting  adjustments   is
expected  to  be completed within the first part of  the  third
quarter of 2001.

   The results of operations of Norweb Energi are reflected  in
the consolidated financial statements of TXU Europe from August
3,  2000, the effective date of the acquisition.  The following
summary  of  unaudited pro forma consolidated  results  of  TXU
Europe's operations reflect the acquisition of Norweb Energi as
though  it  had  occurred at the beginning  of  the  comparable
period of 2000.

                                               Pro Forma
                                               Six Months
                                                 Ended
                                                June 30,
                                                  2000
                                             ------------
                                            pounds million

        Operating Revenues                      2,509
        Operating Income                        296
        Net Income                              109

   The  pro  forma results above are not necessarily indicative
of  what the actual results would have been had the acquisition
actually occurred at the beginning of the period.  Further, the
pro forma amounts are not intended to be a projection of future
results  of  the combined companies. In particular,  the  above
amounts  do  not take into account the expected  impact  Norweb
Energi  would  have  on  the timing of  earnings  from  the  UK
electricity portfolio across the year such that profits in  the
first  and  fourth  quarters  are reduced,  with  a  more  than
offsetting  increase  in the second and third  quarters.   This
arises from constant retail customer prices throughout the year
compared  with  more  seasonal  wholesale  contracts  and  spot
prices.

Dispositions

   In  January  2001, TXU Europe entered into a  commitment  to
sell  its  19.2% interest in Hidroelectrica del Cantabrico,  SA
(Hidrocantabrico)  to  a  consortium led  by  Electricidade  de
Portugal  S.A.,  a  Portuguese  utility  company,  and  Spanish
savings bank Caja de Ahorro de Asturias (Cajastur) for euros 24
per share. TXU Europe waived the pre-emption rights it had over
4.9%  of  the  stock in Hidrocantabrico held by  Electrabel  SA
(Electrabel),  an  electricity company in  Belgium.   In  April
2001,  TXU Europe received net proceeds from the sale of  euros
522 million (pounds 325 million) and recorded a pre-tax gain of
pounds  50  million  in Other Income - Net (pounds  35  million
after-tax).

   In  February  2001, TXU Europe finalized  the  sale  of  its
interest in the North Sea gas fields for pounds 138 million  as
a result of its ongoing review of its program to reposition its
energy  portfolio.  From the date of the sale through June  30,
2001,  TXU Europe has received net cash proceeds of pounds  102
million  after  settlement of certain outstanding  issues,  and
recorded  a  net  pre-tax gain of  pounds 7  million  in  Other
Income - Net (pounds 5 million after-tax).  At the time of  the
                                6

<page>

sale, a forward sell contract was entered into by TXU Europe to
match  the  outstanding  forward  purchase  contracts  on   the
Johnston field portion of the North Sea assets.

   On  July  12,  2001, TXU Europe completed the  sale  of  its
Rugeley   generating  station  for  approximately  pounds   200
million.   Cash received at closing was pounds 67 million  with
the  remaining  cash proceeds from the sale to be  received  in
January  2002.  A letter of credit has been received to  secure
the remaining cash proceeds.  The transaction includes a medium-
term  tolling contract under which TXU Europe will provide coal
for  the  plant and purchase all of its output, thus preserving
TXU  Europe's  ability to participate fully  in  the  new  NETA
balancing market. The sale followed TXU Europe's review of  its
UK  generating portfolio that was announced last year and is in
line  with  its  flexible  portfolio management  strategy.   No
significant  gain or loss is expected to be recognized  in  the
third quarter of 2001 from the sale.

   Under   its  single  energy  business  concept,  TXU  Europe
allocates  risk  capital so as to maximize returns  across  its
markets.   TXU  Europe may dispose of certain assets  to  allow
redeployment  of  resources into faster growing  opportunities.
As  a consequence, the composition of assets and operations  in
each  market  within the portfolio changes from time  to  time.
TXU Europe continually reviews its energy portfolio within each
of  its markets.  TXU Europe's strategy in the UK market is  to
rebalance its energy portfolio through retail growth, long term
wholesale sales and, possibly, sale or lease of physical plant.
TXU Europe has previously announced that it would seek bids for
its  UK power assets to determine how to maximize the value  of
these assets, by keeping them or disposing of them.   There has
been no indication of an impairment of these assets.


2.   SIGNIFICANT ACCOUNTING POLICIES

   The  condensed  consolidated  financial  statements  of  TXU
Europe  and  its subsidiaries have been prepared in  accordance
with  accounting principles generally accepted  in  the  United
States  of  America  (US GAAP) and, except for the adoption  in
the  first  quarter of 2001 of the new accounting standard  for
derivatives discussed in Note 3 below, on the same basis as the
audited financial statements included in its 2000 Annual Report
on  Form 10-K (2000 Form 10-K).  In the opinion of TXU Europe's
management,  all  adjustments  (consisting of normal  recurring
accruals)  necessary for a fair presentation of the results  of
operations  and financial position have been included  therein.
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 US Securities and Exchange  Commission.
The results of operations for an interim period may not give  a
true  indication of results for a full year. Certain previously
reported  amounts have been reclassified to conform to  current
classifications.

   Unless  otherwise  indicated, all amounts in  the  financial
statements  and  notes to financial statements  are  stated  in
millions of UK pounds sterling.

   New   Accounting   Standards  -  SFAS  No.  141,   "Business
Combinations"  is  effective for TXU Europe beginning  July  1,
2001.  SFAS No. 141 requires the use of the purchase method  of
accounting  for business combinations initiated  and  completed
after  June  30, 2001 and eliminates the use of the pooling-of-
interests method.

   SFAS  No.  142, "Goodwill and Other Intangible  Assets",  is
effective for TXU Europe beginning January 1, 2002.   SFAS  No.
142  requires,  among  other  things,  the  discontinuance   of
goodwill   amortization.  The  amortization  of  TXU   Europe's
existing  goodwill  (approximately pounds  123  million  on  an
annualized  basis)  will  cease after December  31,  2001.  Any
goodwill  resulting from acquisitions completed after June  30,
2001 will not be amortized.

   In addition, SFAS No. 142 requires TXU Europe to complete  a
transitional goodwill impairment test six months from the  date
of  adoption  and establishes a new method of testing  goodwill
for impairment on an annual basis or on an interim basis if  an
event occurs or circumstances change that would reduce the fair
                                7

<page>
value  of  a  reporting  unit below its  carrying  value.   Any
goodwill impairment loss during the transition period  will  be
recognized  as the cumulative effect of a change in  accounting
principle.    Subsequent  impairments  will  be   recorded   in
operations.

   SFAS    No.    143,   "Accounting   for   Asset   Retirement
Obligations",  will  be  effective  for  TXU  Europe  beginning
January  1, 2003.  SFAS No. 143 requires the recognition  of  a
fair  value  liability for any retirement obligation associated
with  long-lived assets.   The offset to any liability recorded
is added to the recorded asset where the additional amount is
depreciated  over the   same  period  as  the  long-lived  asset
for which the retirement obligation is established. SFAS No. 143
also requires additional disclosures.

   TXU  Europe is evaluating the impact the adoption  of  these
standards  will have on its financial position and  results  of
operations.


3.   DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

   On   January  1,  2001,  TXU  Europe  adopted  Statement  of
Financial Accounting Standards (SFAS) No. 133, "Accounting  for
Derivative Instruments and Hedging Activities", as extended  by
SFAS  No.  137  (June 1999) and amended by SFAS No.  138  (June
2000).

   In  accordance with the transition provisions  of  SFAS  No.
133,  TXU  Europe recorded, as of January 1, 2001, a cumulative
effect  of pounds 72 million after-tax as a decrease  to  Other
Comprehensive  Income  to  recognize  the  fair  value  of  all
derivatives  effective as cash-flow hedging  instruments.   For
the  period from transition to June 30, 2001, pounds 38 million
of  this  cumulative transition net loss has been  reclassified
into earnings.

   Impact  of  NETA - Prior to the implementation  of  the  New
Electricity  Trading Arrangements (NETA)  on  March  27,  2001,
almost all electricity generated in England and Wales had to be
sold  to the wholesale trading market for electricity, commonly
known as the Pool. In turn, electricity suppliers generally had
to buy electricity from the Pool for resale to their customers.
Even  groups which are both generators and licensed  suppliers,
like TXU Europe, in most circumstances, had to act through  the
Pool to sell all the electricity they generated and to purchase
all  the  electricity  they  sold  to  customers.   Prices  for
electricity were set by the Pool for each half hour,  based  on
bids  of  generators and a complex set of calculations designed
to match supply and demand.

   NETA  provides  those  companies wishing  to  buy  and  sell
electricity  the  freedom  to enter  into  directly  negotiated
contracts  instead of having to trade through the Pool.   Under
the  new arrangement, bulk electricity is traded on one or more
exchanges  and  through  a variety of  bilateral  and  physical
contracts.  Market participants include not only generators and
suppliers  but  also traders, such as energy wholesalers,  with
physical positions.  Consequently, the implementation  of  NETA
has eliminated the Pool.  Most of the derivative contracts used
to  hedge  exposure  to changes in Pool prices  have  now  been
renegotiated into bilateral contracts.  These contracts are now
considered to be "normal purchase" contracts and under SFAS No.
133  are no longer classified as cash-flow hedges. As a result,
pounds  7 million in previously accumulated deferred losses  on
these  contracts  have been reflected as an increase  in  Other
Comprehensive   Income   with  a  corresponding   decrease   in
Derivative Liabilities on the balance sheet.

   Financial  Summary - Essentially all of  the  terms  of  TXU
Europe's  derivatives match the terms of the underlying  hedged
items.   As  a  result,  TXU Europe experienced  minimal  hedge
ineffectiveness  of  pounds 0.1 million, mainly  from  treasury
hedges,  for  the  six months ended June 30,  2001.   This  was
reported   as  Interest  Expense  and  represented  the   total
ineffectiveness  of  all cash-flow hedges.   Also,  pounds  0.5
million of net derivatives losses were realized as a result  of
the  discontinuance  of  cash-flow hedges  related  to  certain
forecasted treasury transactions that are not likely to occur.
                                8

<page>
   As  of  June 30, 2001, it is expected that pounds 71 million
of  net  losses  now  included in  the  net  gains/losses  from
derivative   instruments   that  are   accumulated   in   Other
Comprehensive Income will be reclassified into earnings  during
the  next twelve months.   This amount represents the projected
value  of  the hedges over the next twelve months  relative  to
what  would be recorded if the hedge transactions had not  been
entered into.  The amount expected to be reclassified is not  a
forecasted loss incremental to normal operations, but rather it
demonstrates the extent to which volatility in earnings  (which
would  otherwise  exist) is mitigated through the  presence  of
cash-flow  hedges.  The amount is affected by  the  uncertainty
that  NETA has brought to the industry and its effect on  near-
term contract prices.

   Ongoing  implementation issues being addressed by  standard-
setting  groups may affect the application of SFAS No. 133.  In
April  2001,  the Financial Accounting Standards  Board  (FASB)
finalized  a  conclusion that volume option  contracts  do  not
qualify  for  the  normal purchase and sale  exception.   As  a
result, TXU Europe's gas option contracts will be accounted for
as  derivatives commencing July 1, 2001 in accordance with  the
transition provisions of such revised guidance.  Previously the
gas  option  contracts were classified as normal  purchase  and
sale  contracts  pending final resolution of  the  issue.   TXU
Europe  is evaluating the financial impact resulting  from  the
implementation of this issue.

   In  June  2001, the FASB approved a number of implementation
issues  regarding the normal purchase and sale exception.   One
of  the issues applied exclusively to the electric industry and
provided  for  the  normal purchase and  sale  exception  under
specific   circumstances.   TXU  Europe  evaluated  electricity
contracts under the new guidance and determined that they  will
qualify for the normal purchase and sale exception from July 1,
2001,  thus  removing  them  from SFAS  133  classification  as
derivatives.  As a result, amounts for these contracts will  be
removed  from  Other Comprehensive Income concurrent  with  the
timing  of  the original forecasted transaction that was  being
hedged.   These  contracts represent a  cumulative  balance  of
pounds  5   million  of  accumulated  net  losses   in   Other
Comprehensive Income.


4.   CHANGE IN ACCOUNTING PRINCIPLE - DEPRECIATION

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

   Results for the second quarter and first six months of  2000
were  restated to reflect the increase in net income  resulting
from  the adoption of the new accounting method. The effect  of
the change for the second quarter and six months ended June 30,
2000  was to increase net income by pounds 4 million and pounds
8  million  (after  a reduction for income taxes  of  pounds  2
million and pounds 3 million), respectively.


5.   RESTRUCTURING CHARGES AND OTHER COSTS

   During  the  six months ended June 30, 2001  and  2000,  TXU
Europe recorded restructuring charges and other costs of pounds
28 million and pounds 56 million pre-tax (pounds 20 million and
pounds  41 million after-tax), respectively.  Included  in  the
costs  for  2000 was pounds 7 million of costs associated  with
the  offer for Hidrocantabrico, recorded in Other Income - Net.
The   majority  of  the  remaining  costs  consisted  of  asset
writedowns  and  other  exit  and redundancy  costs  (severance
benefits paid to staff under voluntary retirement programs  and
related pension benefits), primarily as a result of contracting
TXU Europe's customer service operations to Vertex Data Science
Limited, the creation of the 24seven joint venture and  certain
other staff reorganizations.
                                9

<page>
   For   the   six   months  ended  June  30,   2001,   pre-tax
restructuring   charges  consisted  of  redundancy   costs   of
approximately pounds 5 million related to termination  benefits
for  55  employees that had accepted the benefits,   pounds  15
million of asset writedowns and pounds 8 million of other  exit
costs.    For  the  six  months ended June  30,  2000,  pre-tax
restructuring   costs   consisted  of   redundancy   costs   of
approximately   pounds   22  million   related   to   voluntary
termination  benefits  for  442  employees  that  accepted  the
benefits,  pounds 16 million for asset writedowns and pounds 11
million of other exit costs.  The asset writedowns were charged
to  depreciation  expense.  The rest of these costs  have  been
recorded in operation and maintenance expense.

   During  the six months ended June 30, 2001and 2000,   pounds
8 million and pounds 9 million of redundancy costs and pounds 5
million and pounds 9 million of other exit costs charged during
the six months then ended have been paid, respectively.

6.   FINANCING

   Short-term   Facilities  -  In  January  2001,  TXU   Europe
borrowed  an additional euros 182 million (pounds 115  million)
at  5.54%  per  annum  under  its pounds  300  million  364-day
revolving credit facility, as part of the financing to  acquire
Kiel  AG.   As  of June 30, 2001, the amount outstanding  under
this facility was euros 306 million (pounds 183 million).

   Also  in  January  2001,  the  pounds  150  million  Eastern
Electricity revolving credit balance was repaid. In April 2001,
TXU Europe repaid the 1.3 billion Czech Koruna (CzK) (pounds 23
million) outstanding under the short-term CzK facility, and the
facility expired.  This short-term borrowing had been  used  to
hedge  the  net  investment  in a CzK  -  denominated  company,
Teplarney  Brno.    TXU  Europe then  entered  into  a  foreign
currency derivative to serve as the replacement hedge  of  this
investment.   In  May 2001, TXU Europe repaid  and  allowed  to
expire the euros 250 million  (pounds 158 million) facility.

   As  of June 30, 2001, total short-term borrowings aggregated
pounds 230 million with a weighted average annual interest rate
of 5.33%.

   Accounts   Receivable  Securitization  -  TXU   Europe   has
facilities with a commercial bank to provide financing  through
trade accounts receivable whereby Eastern Electricity may  sell
up to pounds 300 million of its electricity receivables and TXU
Finance  (No.2) Limited  (TXU Finance), which is 90%  owned  by
TXU  Europe,  may  borrow  up to an  aggregate  of  pounds  275
million,  collateralized  by  future  receivables  of   Eastern
Electricity, through a short-term note issue arrangement.   The
program has an overall limit of pounds 550 million.

   Eastern    Electricity    continually    sells    additional
receivables to replace those collected. During the  six  months
ended  June  30,  2001,  Eastern Electricity  sold  pounds  1.2
billion  in  receivables  under the program  to  replace  those
receivables that had been collected.  Such sales resulted in no
gain  or  loss.  Under the program, Eastern Electricity  has  a
receivables   servicing  obligation  but  does  not   incur   a
measurable  asset  or liability.  At June  30,  2001,  accounts
receivable  of Eastern Electricity were reduced by  pounds  181
million  under  the  program and pounds  6  million  of  future
receivables  sold were reflected as other short-term  loans  on
the  balance sheet. These borrowings bear interest at an annual
rate,  which  was  5.3% at June 30, 2001, based  on  commercial
paper rates plus a margin.

   Long-Term  Lines  of Credit - At June 30, 2001,  TXU  Europe
and TXU Finance had a joint sterling-denominated line of credit
with  a  group of banking institutions under a credit  facility
agreement  (Sterling Credit Agreement).  As of June  30,  2001,
the Sterling Credit Agreement provided for borrowings of up  to
pounds  1.075  billion  and had two facilities:  a  pounds  750
million term facility and a pounds 325 million revolving credit
facility (Tranche B), both of which terminate on March 2, 2003.
The  Sterling Credit Agreement allows for borrowings in various
currencies with interest rates based on the prevailing rates in
effect in the countries in which the borrowings originate.   In
January  2001, in connection with the acquisition of  Kiel  AG,
TXU  Europe borrowed an additional euros 47 million (pounds  30
million)  under  Tranche B.  As of June 30,  2001,  pounds  750
                                10

<page>
million  of borrowings were outstanding under the term facility
at  an interest rate of 6.0% per annum, and outstanding Tranche
B  borrowings  consisted of 700 million Norwegian kroner  (NOK)
(pounds  53  million) at 8.2% per annum and euros  258  million
(pounds 155 million) at 5.3% per annum.

   TXU  Europe  has a euros 2.0 billion Euro Medium  Term  Note
(EMTN)  program.  Under the EMTN program, TXU Europe  may  from
time  to time issue notes in various currencies on a continuing
basis  to one or more dealers in an aggregate principal  amount
outstanding of euros 2.0 billion.  At June 30, 2001, there were
pounds 676 million of various borrowings outstanding under this
program  with  an aggregate weighted average interest  rate  of
7.1% per annum.

   In  January  2001,  the outstanding balance  of  pounds  190
million of the rent factoring loans due to banks was repaid.

   In  June 2001, TXU Europe purchased approximately pounds  32
million  of  US Treasury securities with various maturities  to
match  the  required  interest  and  principal  repayments   to
maturity on a subsidiary's junior subordinated debentures  held
by another subsidiary.  These amounts have been included in the
June 30, 2001 balance sheet as restricted cash.

7. CONTINGENCIES

   Legal   Proceedings  -  In  February  1997,   the   official
government  representative of pensioners  (Pensions  Ombudsman)
made  a  final determination against the National Grid  Company
plc  (National  Grid) and its group trustees  with  respect  to
complaints by two pensioners in National Grid's section of  the
Electricity  Supply Pension Scheme (ESPS).   The  determination
related  to the use of the pension fund surplus resulting  from
the  March  31,  1992 actuarial valuation of the National  Grid
section  to  meet  certain costs arising from  the  payment  of
pensions on early retirement upon reorganization or downsizing.
This determination was set aside by the High Court on June  10,
1997,  and the arrangements made by National Grid and its group
trustees  in dealing with the surplus were confirmed.  The  two
pensioners  appealed this decision to the Court of Appeal,  and
judgment  was received which endorsed the Pensions  Ombudsman's
determination  that  the  corporation  was  not   entitled   to
unilaterally deal with any surplus. National Grid appealed  the
decision  to  the  House of Lords and, on April  4,  2001,  the
appeal  was  allowed.  The House of Lords found  that  National
Grid  was  entitled to use the surplus funds as they had  done.
As  a  result of the decision of the House of Lords, TXU Europe
considers  that the likelihood of a claim of this nature  being
made against it to be remote.

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

   In   August   2000,  the  Spanish  Stock  Market  Commission
announced  it  was opening an investigation as to  whether  TXU
Europe and Electrabel acted in concert over share purchases  of
Hidrocantabrico in order to avoid making a formal takeover bid.
TXU  Corp.  was originally named as a party but is seeking  its
removal  from these proceedings. Philip Turberville, the  chief
executive officer of TXU Europe, was also named as a  party  in
the  investigation.  If the two utilities are found  to  be  in
violation  of  Spanish  securities  law,  they  could  face   a
substantial  fine  and other restrictions.   The  investigation
could  last  until  February 2002.  TXU  Europe  is  unable  to
                                11

<page>
determine what impact there may be, if any, as a result of  the
investigation.  TXU Europe and TXU Corp. believe there has been
no   violation  of  Spanish  securities  laws  and  are   fully
cooperating with the investigation.

   General  -  In  addition to the above, TXU  Europe  and  its
subsidiaries   are  involved  in  various   other   legal   and
administrative proceedings which, in the opinion of management,
should  not have a material effect on their financial position,
results of operations or cash flows.

   Financial  guarantees  -  TEG has guaranteed  up  to  US$110
million  (pounds  78  million) at  June  30,  2001  of  certain
liabilities that may be incurred and payable by the  purchasers
of  TEG's  US  and  Australian coal businesses  and  US  energy
marketing operations sold in 1998 prior to acquisition  of  TEG
by  TXU Corp.  These guarantees are with respect to the Peabody
Holding  Company  Retirement Plan for Salaried  Employees,  the
Powder River Coal Company Retirement Plan and the Peabody  Coal
UMWA  Retirement  Plan  and are subject  to  certain  specified
conditions.

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

8.   SEGMENT INFORMATION

   TXU  Europe has two reportable operating business  segments,
Energy  and Networks. Beginning in the first quarter  of  2001,
TXU   Europe  undertook  an  internal  reorganization  of   its
businesses to reflect a single energy business concept for  the
management of its energy activities in a consistent  manner  in
its  different geographical areas. Amounts for the three months
and  six  months ended June 30, 2000 have been reclassified  to
conform  to  the new presentation.  As reflected in the  tables
below,  the  income  contribution  for  each  segment  includes
operating and other income on a US GAAP basis, before interest,
income  taxes, distributions and minority interests  and  after
deducting  a  notional charge for the cost of  capital  (income
before interest).


                                12

<page>
<table>
<caption>

                                              Three Months Ended June 30,
                                        ---------------------------------------
                                               2001                 2000
                                        ------------------   ------------------
                                                    Income              Income
                                                    before              before
                                        Revenues   Interest  Revenues  Interest

                                                 (pounds  million)

                                      <c>          <c>       <c>       <c>
UK .................................     1,562          91       714       61
Continental Europe .................       304          58        69        2
                                        ------       -----     -----     ----
    Total Energy ...................     1,866         149       783       63
                                        ------       -----     -----     ----
Networks ...........................        72          22        78       25
Other ..............................         4           6         5       30
Inter-segment eliminations .........       (40)          -       (45)       -
                                        ------       -----     -----     ----
        Total ......................     1,902         177       821      118
                                        ======       -----     =====     ----

Cost of capital elimination ........                    36                 39
Unallocated corporate costs ........                   (44)               (27)
                                                     -----               ----
Income before interest,income
  taxes, distributions and
  minority interest ................                   169                130
                                                     =====               ====
</table>

<table>
<caption>

                                                Six Months Ended June 30,
                                        ---------------------------------------
                                               2001                 2000
                                        ------------------   ------------------
                                                    Income              Income
                                                    before              before
                                        Revenues   Interest  Revenues  Interest

                                                 (pounds  million)

                                      <c>          <c>      <c>        <c>
UK .................................     3,492         212     1,758      160
Continental Europe .................       641          83       119        6
                                        ------       -----    ------     ----
    Total Energy ...................     4,133         295     1,877      166
                                        ------       -----    ------     ----
Networks ...........................       161          64       201       93
Other ..............................         7          12        17       31
Inter-segment eliminations .........       (94)          -      (123)       -
                                        ------       -----    ------     ----
        Total ......................     4,207         371     1,972      290
                                        ======       -----    ======     ----

Cost of capital elimination ........                    72                 77
Unallocated corporate costs ........                   (89)               (85)
                                                     -----               ----
Income before interest,income
  taxes, distributions and
  minority interest ................                   354                282
                                                     =====               ====
</table>

                                        13

<page>

9.   SUPPLEMENTARY FINANCIAL INFORMATION

   Accounts  Receivable  - At June 30, 2001  and  December  31,
2000,  accounts  receivable were stated  net  of  uncollectible
accounts   of   pounds  29  million  and  pounds  31   million,
respectively.

   Property,  Plant  and  Equipment -  At  June  30,  2001  and
December  31, 2000, property, plant and equipment  were  stated
net  of  accumulated  depreciation of pounds  435  million  and
pounds 398 million, respectively.

   Goodwill  - At June 30, 2001 and December 31, 2000, goodwill
was  stated  net  of  accumulated amortization  of  pounds  302
million and pounds 240 million, respectively.

   Credit  Risk - Credit risk relates to the risk of loss  that
TXU  Europe  would  incur  as a result  of  non-performance  by
counterparties. TXU Europe maintains credit risk policies  with
regard   to   its   counterparties  that  management   believes
significantly  minimize overall credit  risk.   These  policies
include  an  evaluation of potential counterparties'  financial
condition  (including credit rating), guarantees and collateral
requirements  under  certain  circumstances  and  the  use   of
standardized agreements that allow for the netting of  positive
and negative exposures associated with a single counterparty.

   Concentration  of Credit Risk - TXU Europe's gross  exposure
to  credit risk (before any netting agreements or reserves)  in
Continental  Europe and the UK as of June 30, 2001  was  pounds
1.9  billion.  These regional concentrations have the potential
to  affect TXU Europe's overall exposure to credit risk, either
positively  or  negatively,  in  that  the  customer  base  and
counterparties  may  be  similarly  affected  by   changes   in
economic, regulatory, industry, weather or other conditions.

   The  majority  of the counterparties that TXU  Europe  deals
with  are  major  energy companies and financial  institutions,
which  are  considered  to be of investment  grade,  determined
using  publicly available information including  a  Standard  &
Poor's  rating  of  at least BBB-. TXU Europe's  exposure  from
transactions with one customer represented 6% of the gross fair
value  of  TXU  Europe's accounts receivable,  merchant  energy
trading  assets and derivative assets at June 30,  2001.   This
customer is an investment grade major energy company.  The risk
of  loss to TXU Europe arising from non-performance by this and
other  counterparties is considered unlikely.  In the  event  a
counterparty's  credit rating declines, TXU  Europe  may  apply
certain remedies, if considered necessary.

   Based  on  TXU  Europe's policies for managing credit  risk,
its  exposures  and its credit and other reserves,  TXU  Europe
does  not  anticipate  a  materially  adverse  effect  on   its
financial position or its results of operations as a result  of
non-performance by any counterparty.
                                14

<page>

INDEPENDENT ACCOUNTANTS' REPORT



TXU Europe Limited:

We   have  reviewed  the  accompanying  condensed  consolidated
balance  sheet  of  TXU  Europe Limited and  subsidiaries  (TXU
Europe)  as  of  June  30,  2001,  and  the  related  condensed
statements of consolidated income and comprehensive income  for
the  three-month and six-month periods ended June 30, 2001  and
2000  and  the condensed statements of consolidated cash  flows
for  the six-month period ended June 30, 2001 and 2000.  These
financial  statements are the responsibility  of  TXU  Europe's
management.

We   conducted   our  review  in  accordance   with   standards
established  by  the  American Institute  of  Certified  Public
Accountants.    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  auditing  standards
generally  accepted  in  the  United  States  of  America,  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 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  auditing
standards  generally accepted in the United States of  America,
the consolidated balance sheet of TXU Europe as of December 31,
2000,  and  the  related  consolidated  statements  of  income,
comprehensive income, cash flows and shareholder's  equity  for
the  year then ended (not presented herein); and in our  report
dated February 1, 2001, 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, 2000  is  fairly
stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.




DELOITTE & TOUCHE
London, England
July 25, 2001

                                15

<page>

                       TXU EUROPE LIMITED
Item 2. Management's Discussion and Analysis of Financial Condition
                   and Results of Operations


BUSINESS, ACQUISITIONS AND DISPOSITIONS

   TXU  Europe  Limited  (TXU Europe) is an  indirect,  wholly-
owned  subsidiary of TXU Corp., a Texas corporation.  TXU Corp.
is  a  global energy services company that engages in  electric
and  natural  gas  services, electricity  generation,  merchant
energy    trading,    energy   marketing,   energy    delivery,
telecommunications,   and   other   energy-related    services,
primarily in the United States (US), Europe and Australia.  TXU
Europe is a holding company for TXU Corp.'s United Kingdom (UK)
and  other  European  operations. Almost all  of  TXU  Europe's
operating  income is derived from, and consolidated assets  are
held by, TXU Europe Group plc (TXU Europe Group) and TXU Europe
Group's subsidiaries.

   On  January 8, 2001, TXU Europe completed the acquisition of
51% of Stadtwerke Kiel AG (Kiel AG) for pounds 145 million. The
acquisition of Kiel AG was accounted for as a purchase business
combination.  At the date of acquisition, Kiel AG had  sterling
equivalent  assets  of  pounds 121 million and  liabilities  of
pounds  82 million.  The process of determining the fair  value
of  the  assets  and liabilities of Kiel AG  continues  but  is
expected  to  be  completed within one year of the  acquisition
date.  TXU  Europe's latest estimate of goodwill is pounds  106
million, which is being amortized over 40 years. This amount is
subject  to further revision as additional information  on  the
fair  value of assets acquired and liabilities assumed  becomes
available.  The results of operations of Kiel AG are  reflected
in  the  consolidated financial statements from the January  8,
2001  acquisition  date.   Pro forma information  for  the  six
months ended June 30, 2001 and 2000, reflecting the acquisition
of  Kiel AG, would not be significantly different from reported
amounts.

   On  May  1, 2001, Kiel AG acquired all of the share  capital
of  Ares  Energie  GmbH (Ares), based in Berlin,  Germany,  for
approximately  24  million Deutsche Marks (pounds  8  million).
Ares  is  an electricity retailer, offering energy services  to
both  business  customers and residential customers  throughout
Germany.   At the date of acquisition, Ares had 110,000  active
customers.  Pro forma information for the six months ended June
30,  2001  and 2000, reflecting the acquisition of Ares,  would
not be significantly different from reported amounts.

   In  August 2000, TXU Europe purchased United Utilities plc's
retail  energy  supply business, Norweb Energi (a  division  of
Norweb plc), for total consideration, including direct costs of
the acquisition, of pounds 340 million. In the transaction, TXU
Europe  assumed certain of Norweb Energi's obligations.   These
include  Norweb Energi's power purchase agreements, which  have
been integrated into TXU Europe's energy portfolio.

   In  January  2001, TXU Europe entered into a  commitment  to
sell  its  19.2% interest in Hidroelectrica del Cantabrico,  SA
(Hidrocantabrico)  to  a  consortium led  by  Electricidade  de
Portugal  S.A.,  a  Portuguese  utility  company,  and  Spanish
savings bank Caja de Ahorro de Asturias (Cajastur) for euros 24
per share. TXU Europe waived the pre-emption rights it had over
4.9%  of  the  stock in Hidrocantabrico held by  Electrabel  SA
(Electrabel),  an  electricity company in  Belgium.   In  April
2001,  TXU Europe received net proceeds from the sale of  euros
522 million (pounds 325 million) and recorded a pre-tax gain of
pounds  50  million  in Other Income - Net (pounds  35  million
after-tax).

   In  February  2001, TXU Europe finalized  the  sale  of  its
interest in the North Sea gas fields for pounds 138 million  as
a result of its ongoing review of its program to reposition its
energy  portfolio.  From the date of the sale through June  30,
2001,  TXU Europe has received net cash proceeds of pounds  102
million  after  settlement of certain outstanding  issues,  and
recorded  a  net  pre-tax gain of  pounds 7  million  in  Other
Income - Net (pounds 5 million after-tax).  At the time of  the
sale, a forward sell contract was entered into by TXU Europe to
match  the  outstanding  forward  purchase  contracts  on   the
Johnston field portion of the North Sea assets.

   On  July  12,  2001, TXU Europe completed the  sale  of  its
Rugeley   generating  station  for  approximately  pounds   200
million.   Cash received at closing was pounds 67 million  with
the  remaining  cash proceeds from the sale to be  received  in
January  2002.  A letter of credit has been received to  secure
the remaining cash proceeds.  The transaction includes a medium-
term  tolling contract under which TXU Europe will provide coal
for  the  plant  and purchase its output, thus  preserving  TXU
Europe's ability to participate fully in the new NETA balancing
                                16

<page>
market.  The  sale  followed  TXU Europe's  review  of  its  UK
generating  portfolio that was announced last year  and  is  in
line  with  its  flexible  portfolio management  strategy.   No
significant  gain or loss is expected in the third quarter of
2001 from the sale.

   Under   its  single  energy  business  concept,  TXU  Europe
allocates  risk  capital so as to maximize returns  across  its
markets.   TXU  Europe may dispose of certain assets  to  allow
redeployment  of  resources into faster growing  opportunities.
As  a consequence, the composition of assets and operations  in
each  market  within the portfolio changes from time  to  time.
TXU Europe continually reviews its energy portfolio within each
of  its markets.  TXU Europe's strategy in the UK market is  to
rebalance its energy portfolio through retail growth, long term
wholesale sales and, possibly, sale or lease of physical plant.
TXU Europe has previously announced that it would seek bids for
its  UK power assets to determine how to maximize the value  of
these assets, by keeping them or disposing of them.   There has
been no indication of an impairment of these assets.


RESULTS OF OPERATIONS

      Results  for  the three and six-month periods  presented
herein  are not necessarily indicative of expectations  for  a
full  year's operations because of seasonal and other factors,
including   variations  in  maintenance  and  other  operating
expense patterns. No significant changes or events which might
affect  the  financial condition of TXU Europe  have  occurred
subsequent  to  year-end  other than  as  disclosed  in  other
reports of TXU Europe or included herein.

Three  Months  Ended June 30, 2001 Compared With  Three  Months
     Ended June 30, 2000

   Overview  - Net income for the three months ended  June  30,
2001 was pounds 42 million compared with pounds 32 million  for
the same period in 2000.  After adjusting for the effect of the
disposal of the metering business and restructuring costs,  net
income  in the 2000 period was pounds 20 million. (The disposal
of  the  metering business has been treated outside  of  normal
operations since the business was part of neither the  networks
nor  the  energy  businesses and therefore, represents  a  non-
recurring gain.)  The improvement in net income for the  second
quarter  of  2001  reflects a continued strong  performance  in
merchant energy trading activities across Europe, the timing of
earnings from the Norweb Energi business and gain from the sale
of  a previous investment in Hidroelectrica del Cantabrico,  SA
(Hidrocantabrico)  in  Spain  (pounds  35  million  after-tax),
partially offset by restructuring costs.

   Income  before  interest,  income taxes,  distributions  and
minority  interest  (income before  interest)  was  pounds  169
million for the three months ended June 30, 2001 compared  with
pounds  130 million for the same period in 2000. Revenues  were
pounds  1.9 billion for the three months in 2001 compared  with
pounds 0.8 billion for the three months in 2000.

   The  increase  in revenues resulted from increased  merchant
energy  trading  activity, particularly in UK  energy  trading,
which was impacted by the implementation of the New Electricity
Trading  Arrangements  (NETA) on March 27,  2001,  and  by  the
inclusion  of  the results of Norweb Energi and Kiel  AG  since
their  acquisition  on  August 3, 2000  and  January  8,  2001,
respectively.

   During  the three months ended June 30, 2001 and  2000,  TXU
Europe  recorded  restructuring  charges  and  other  costs  of
approximately pounds 12 million pre-tax (pounds 8 million after-
tax)  and  pounds 13 million pre-tax (pounds 9  million  after-
tax),  respectively.  Most of these costs  consisted  of  asset
writedowns  and  other  exit  and redundancy  costs  (severance
benefits paid to staff under voluntary retirement programs  and
related  pension benefits), primarily a result  of  contracting
TXU Europe's customer service operations to Vertex Data Science
Limited, the creation of the 24seven joint venture and  certain
other staff reorganizations.
                                17

<page>
   Energy purchased for resale and fuel consumed for the  three
months ended June 30, 2001 was pounds 1.5 billion compared with
pounds 0.6 billion for the same period in 2000, primarily as  a
result  of  the  increase in merchant energy  trading  activity
together  with  the impact of Norweb Energi and Kiel  AG  since
their   acquisition.   Other  operating  expenses  were  higher
compared with the three month period of 2000, mainly due to the
inclusion  of Norweb Energi and Kiel AG, offsetting  reductions
to  depreciation expense for the three months  ended  June  30,
2000  which  has  been  restated  to  reflect  the  change   in
depreciation as described in Note 4 to Financial Statements.

   Net   interest  expense  (interest  expense  less   interest
income) for the three months ended June 30, 2001 was pounds  83
million compared with pounds 75 million for the same period  in
2000, primarily due to increased borrowings used to finance the
Norweb Energi and Kiel AG acquisitions.

   Total  income  tax expense for the three months  ended  June
30,  2001 was pounds 35 million compared with pounds 18 million
for  the  same period in 2000.  The effective tax rate in  2001
was affected by higher amounts of amortization of goodwill from
the  Norweb Energi and Kiel AG acquisitions.  The effective tax
rate in 2000 was impacted by non-deductible items related to  a
capital  lease  and  non-deductible  expenses  related  to  the
investment in Hidrocantabrico.

   Minority interest for the three months ended June 30,  2001,
has  increased  in  comparison with the  same  period  in  2000
primarily  as a result of including the 49% minority  ownership
in Kiel AG.

   The  expected  effect  of the Norweb Energi  acquisition  on
income before interest is to alter the timing of earnings  from
the  UK electricity portfolio across the year such that profits
in  the first and fourth quarters are reduced with a more  than
offsetting  increase  in the second and third  quarters.   This
arises from constant retail customer prices throughout the year
compared  with  more  seasonal  wholesale  contracts  and  spot
prices.

Six Months Ended June 30, 2001 Compared With Six Months Ended
     June 30, 2000

   Overview  -  Net  income for the six months ended  June  30,
2001 was pounds 83 million compared with pounds 78 million  for
the  same  period in 2000. Included in net income for the  2000
period  is pounds 7 million (net of deferred taxes of pounds  3
million) for the cumulative effect on periods prior to December
31, 1999 of a change in the method of depreciating distribution
system  assets  from an accelerated method to a  straight  line
method.  The previously reported period ended June 30, 2000 has
been  changed  to  reflect  the new  depreciation  method  from
January  1,  2000  as  well as the restatement  in  calculating
minority  interest.  The improvement in  net  income  for  2001
reflects  a  continued strong performance  in  merchant  energy
trading  activities across Europe, the timing of earnings  from
the  Norweb  Energi  business and  a  gain  from  the  sale  of
Hidrocantabrico  as  well as lower restructuring  costs.  These
favorable factors offset the effect of lower networks  revenues
and  higher  interest and related charges. After adjusting  for
the  effect  of  the  disposal of  the  metering  business  and
restructuring costs, net income in the 2000 period  was  pounds
98 million compared with pounds 103 million for the 2001 period
(after deducting restructuring costs).

   Income  before interest was pounds 354 million for  the  six
months ended June 30, 2001 compared with pounds 282 million for
the  same  period in 2000.  Revenues of pounds 4.2 billion  for
the  first  six months of 2001 were up over 100% compared  with
the pounds 2.0 billion for the first six months of 2000.

   The  increase in revenues resulted primarily from  increased
merchant  energy  trading activity and  the  inclusion  of  the
results  of  Norweb Energi and Kiel AG since their acquisition.
These  revenue  increases were partially  offset  by  decreased
revenues   in  the  networks  segment  resulting   from   price
reductions following the April 1, 2000 OFGEM distribution price
review.   Within the Energy segment, in addition to the  effect
of  the  inclusion of Norweb Energi and Kiel AG, UK gas  prices
continued  to  be  higher and more volatile than  in  the  same
period in 2000.

   During  the  six months ended June 30, 2001  and  2000,  TXU
Europe recorded restructuring charges and other costs of pounds
28 million and pounds 56 million pre-tax (pounds 20 million and
                                18

<page>
pounds  41 million after-tax), respectively.  Included  in  the
costs  for  2000 was pounds 7 million of costs associated  with
the  offer for Hidrocantabrico, recorded in Other Income - Net.
The   majority  of  the  remaining  costs  consisted  of  asset
writedowns  and  other  exit  and redundancy  costs  (severance
benefits paid to staff under voluntary retirement programs  and
related pension benefits), primarily as a result of contracting
TXU Europe's customer service operations to Vertex Data Science
Limited, the creation of the 24seven joint venture and  certain
other staff reorganizations.

   Energy  purchased for resale and fuel consumed for  the  six
months ended June 30, 2001 was pounds 3.3 billion compared with
pounds 1.3 billion for the same period in 2000, primarily as  a
result  of  the  increase in merchant energy  trading  activity
together  with  the impact of Norweb Energi and Kiel  AG  since
their  acquisition. Other operating expenses for the six months
ended June 30, 2001were higher compared with the same period in
2000, mainly due to the inclusion of Norweb Energi and Kiel AG,
offsetting  reductions  to depreciation  expense  for  the  six
months  ended June 30, 2001 which has been restated to  reflect
the  change in depreciation as described in Note 4 to Financial
Statements.

   Net  interest expense for the six months ended June 30, 2001
was pounds 176 million compared with pounds 148 million for the
same  period in 2000, primarily due to increased borrowings  to
finance  the  Norweb  Energi  and  Kiel  AG  acquisitions   and
accelerated  amortization  of debt issue  costs  following  the
early repayment of the rent factoring debt in January 2001.

   Total  income tax expense for the six months ended June  30,
2001 was pounds 73 million compared with pounds 52 million  for
the  same  period  in 2000.  The effective  tax  rate  in  both
periods is affected by amortization of goodwill and other  non-
deductible  items  primarily related to a  capital  lease.  The
effective  tax  rate  in  the 2000  period  is  also  adversely
impacted   by   non-deductible   expenses   related   to    the
Hidrocantabrico offer.

   Minority  interest in the six-month period  ended  June  30,
2001, has increased in comparison with the same period in 2000,
primarily  as a result of including the 49% minority  ownership
in Kiel AG.

   See  Note  8  to  Financial Statements  for  information  on
revenues and income before interest by operating segment.

                                 19

<page>
<table>
<caption>

OPERATING STATISTICS

                                          Three Months Ended   Six Months Ended
                                               June 30,            June 30,
                                          ------------------  -----------------
                                            2001       2000     2001      2000
                                          -------   --------  -------   -------

                                        <c>      <c>        <c>       <c>
PHYSICAL SALES VOLUMES
  Electricity (gigawatt-hours)-(GWh):
    Industrial and commercial .........    6,404     3,602     12,728     7,191
    Residential .......................    5,064     2,399     11,769     6,973
                                         -------    ------    -------   -------
      Total electricity ...............   11,468     6,001     24,497    14,164
                                         =======    ======    =======   =======

  Gas (billion cubic feet)- (Bcf):
    Industrial and commercial .........       12        13         35        31
    Residential .......................       17         8         58        28
                                         -------    ------    -------   -------
      Total gas .......................       29        21         93        59
                                         =======    ======    =======   =======
  Wholesale energy sales:
    Electricity (GWh)..................   31,605    33,263     75,355    57,698
                                         =======    ======    =======   =======
    Gas (Bcf) .........................      345       275        724       461
                                         =======    ======    =======   =======

  Electricity units distributed (GWh)..    7,404     7,621     17,308    16,825
                                         =======    ======    =======   =======

----------------------------------------------------------
CUSTOMERS (end of period & in thousands)
  Electricity (retail) ................    4,477     2,717
  Gas .................................    1,276       714

</table>

Results by Segment

   Energy  -  The  Energy  business segment  is  managed  on  a
geographical basis - in the UK and in continental Europe  which
comprises  the  Central European, Nordic,  Iberian  and  German
(Kiel AG) operations.

   UK  - Revenues for the three months ended June 30, 2001 were
pounds 1.6 billion compared to pounds 0.7 billion for the three
months  ended June 30, 2000. The increase is partly  associated
with  the  inclusion of results from Norweb Energi (pounds  184
million), since acquisition in August 2000.  The balance of the
increase  reflects the significant increase in merchant  energy
trading activity.

   Income  before interest for the three months ended June  30,
2001  was  pounds 91 million compared to pounds 61 million  for
the   same   period  in  2000.   The  UK  electricity  business
contributed pounds 35 million more in the three months in  2001
than in the same period in 2000. The improvement in electricity
reflects  the  levels  and  more  balanced  timing  of   income
resulting  from  the Norweb Energi acquisition  and  shows  the
strength  of  TXU Europe's operations in the new UK electricity
market  since implementation of NETA. This margin increase  was
partially  offset by an increase in operating expenses,  mainly
                                20

<page>
from  restructuring costs.  Margin contribution by gas  trading
activities  for  the  three months  ended  June  30,  2001  was
relatively  unchanged  from the prior  year  period  as  prices
stabilized and became less volatile.

   Revenues for the six months ended June 30, 2001 were  pounds
3.5  billion compared to pounds 1.8 billion for the six  months
ended June 30, 2000. The increase is partly associated with the
inclusion  of  the  results  from  Norweb  Energi  (pounds  452
million),  since  acquisition  in  August  2000.   The  balance
reflects  the  significant increase in merchant energy  trading
activity.

   Income  before  interest for the six months ended  June  30,
2001 was pounds 212 million compared to pounds 160 million  for
the  period  ended  June  30,  2000.  This  increase  primarily
reflects an improvement in margins of  pounds 80 million offset
by  an  increase in operating costs of pounds 30  million.  The
margin  improvement consisted of pounds 19  million  of  higher
electricity  margins  and  pounds  62  million  of  higher  gas
margins,  which were primarily due to rising and  volatile  gas
prices  in comparison to the previous year period. The increase
in  operating costs reflects the inclusion of Norweb Energi and
an increase in restructuring charges of pounds 6 million.

   Continental  Europe  - Revenues for the three  months  ended
June  30,  2001 were pounds 304 million compared to  pounds  69
million  for the same period in 2000.  Part of the increase  is
due  to  the inclusion of Kiel AG (pounds 45million),  and  the
balance  is  due  to  the increase in merchant  energy  trading
activity  in  continental European markets,  primarily  through
continuing portfolio-driven improvements in the Nordic  region.
This  merchant  energy trading activity has increased  steadily
from  the relatively low volumes in the three months ended June
30, 2000.

   Income  before interest for the three months ended June  30,
2001 was pounds 58 million compared to pounds 2 million for the
same period in 2000. This increase reflects the pre-tax gain on
the  sale  of  the  investment  in Hidrocantabrico  (pounds  50
million),  the  inclusion of Kiel AG (pounds 3  million)  since
acquisition and profitable trading in the Nordic region (pounds
7 million) partly offset by the effect of a softening of prices
in Central European markets (pounds 4 million).   The shares in
Hidrocantabrico had been acquired during 1999 and 2000 as  part
of  the  Europe-wide merchant energy portfolio.  The gain  from
this  sale reinforces TXU Europe's record in capturing  capital
as  well  as profits from the portfolio model, as evidenced  by
gains reported most recently in 2001 from the sale of the North
Sea  upstream  gas business and in the previous year  the  gain
from  the  investment in SME in the Czech Republic. TXU  Europe
intends such sales, where appropriate, to continue to form part
of  the business model and results profile for TXU Europe.  TXU
Europe's  interest  in  the  trading and  business  development
opportunities in the Spanish market continues.

   Revenues for the six months ended June 30, 2001 were  pounds
641  million compared to pounds 119 million for the six  months
ended  June  30,  2000.  The increase  is  partly  due  to  the
inclusion of Kiel AG (pounds 106 million).  The balance of  the
increase  is  due  to the increase in merchant  energy  trading
activity in the Central European and Nordic markets.

   Income  before  interest for the six months ended  June  30,
2001 was pounds 83 million compared to pounds 6 million for the
six-month period ended June 30, 2000. The increase reflects the
gain  on  the sale of the investment in Hidrocantabrico (pounds
50 million), Kiel AG results (pounds 15 million) and profitable
trading in the Nordic region (pounds 19 million) partly  offset
by a softening of prices in Central European markets (pounds  7
million).


   Networks  -  Revenues for the three months  ended  June  30,
2001  were pounds 72 million compared to pounds 78 million  for
the  same  period  in 2000. The reduction  is  due  to  adverse
movements in the mix of volumes distributed at different tariff
rates.

     Income before interest for the three months ended June 30,
2001  was  pounds 22 million compared to pounds 25 million  for
the  same  period  in  2000. This reduction  results  from  the
reduced revenues partly offset by the reduction in depreciation
expense  resulting  from  the change  in  depreciation  and  to
                                21

<page>
reduced operating expenses.  Operating cost savings reflect the
on-going cost savings and operating efficiencies resulting from
the operation of the electricity distribution system by its 50%
owned 24seven joint venture.

     Revenues  for  the  six months ended June  30,  2001  were
pounds  161 million compared to pounds 201 million for the  six
months ended June 30, 2000. The reduction is largely due to the
impact  of  the  OFGEM  Distribution Price  Review  (pounds  29
million) which was effective as of April 1, 2000.

     Income  before interest for the six months ended June  30,
2001  was  pounds 64 million compared to pounds 93 million  for
the  period ended June 30, 2000. The reduction is explained  by
the  reduced  revenues, as discussed above,  partly  offset  by
reduced  depreciation expense from the change  in  depreciation
and  by  reduced  operating expenses.  Operating  cost  savings
reflect  the  on-going cost savings and operating  efficiencies
resulting from the 24seven joint venture.

     Other  - Income before interest for the three months ended
June  30,  2001  was  pounds 6 million compared  to  pounds  30
million  for  the same period in 2000.  Income before  interest
for  the  six months ended June 30, 2001 was pounds 12  million
compared  to  pounds 31 million for the same  period  in  2000.
Included  in  the results for 2001 is the pre-tax gain  on  the
sale  of the North Sea upstream gas business (pounds 7 million)
while  the 2000 period includes the pre-tax gain from the  sale
of the metering business (pounds 30 million).

Comprehensive Income

   The  unrealized holding gains on investments  are  primarily
related  to market changes in the value of the 19.2% investment
in  Hidrocantabrico, which were realized into earnings with the
sale of the investment in the second quarter of 2001.

   The  implementation  of  Statement of  Financial  Accounting
Standards (SFAS) No. 133 "Accounting for Derivative Instruments
and   Hedging  Activities"  resulted  in  a  cumulative  effect
reduction   of   pounds  72  million  net  of  tax   in   Other
Comprehensive Income as of January 1, 2001.  During the quarter
ended  June  30,  2001, the change in fair value  of  cash-flow
hedges  was  a reduction of  pounds 3 million after  tax  while
pounds  30  million  after  tax  of  the  deferred  amount  was
recognized  in  earnings.  In addition, with the implementation
of  NETA  in the UK, most of the derivative contracts  used  to
hedge  exposure  to changes in the Pool prices  have  now  been
renegotiated into bilateral contracts and are now considered to
be  "normal purchase" contracts, thus removing them  from  SFAS
No.  133  classification as cash-flow hedges.  These have  been
reflected as an increase in Other Comprehensive Income  (pounds
7  million net of tax reduction for the second quarter of 2001)
with  a corresponding decrease in Derivative Liabilities.   See
Note 3 to Financial Statements for additional information.

   The  implementation of SFAS No. 133 has had  minimal  effect
on  TXU  Europe's  results of operations.  The merchant  energy
trading businesses in the UK and continental Europe use mark-to-
market  accounting  for  their  trading  activities.   Merchant
energy  trading transactions that are derivatives  pursuant  to
SFAS  No. 133 also are required to be accounted for using mark-
to-market accounting.  Therefore, SFAS No. 133 has not affected
merchant energy trading operating results.

   TXU  Europe has historically used, and will continue to use,
other  derivatives  to offset future cash  flow  volatility  in
interest rates, currency exchange rates and energy commodities,
essentially   converting   variable   arrangements   to   fixed
arrangements.  The fair value of derivatives that are effective
as  cash-flow  hedges  are  recorded as  derivative  assets  or
liabilities  with  an  offset  in Other  Comprehensive  Income.
Accordingly, the principal impact of SFAS No. 133 has  been  on
the balance sheet.
                                22

<page>

   The  balance  sheet  value  of these  derivative  assets  or
liabilities  can change significantly from quarter  to  quarter
based  on  changes  in market expectations of economic  events,
such as movements in foreign exchange rates, the recent drop in
interest  rates and changes in actual and expected natural  gas
and  electricity  prices.  The fair value of  these  cash-flow-
hedge  derivatives is determined each quarter based  on  actual
and  forecasted  interest rates, currency rates  and  commodity
prices.  Consistent with the above, the effect  of  changes  in
fair  value  is reflected in the derivative asset or  liability
and in Other Comprehensive Income.

   The  amounts  included  within  Other  Comprehensive  Income
reflect  the  value of the cash-flow hedges  based  on  current
market conditions and therefore the amount for which the  hedge
will  be  used in the future to offset the impact  of  expected
changes  in variable prices.   Consistent with hedge accounting
prior  to  SFAS No. 133, the effects of the hedged  transaction
will  be  recorded in the statement of income  as  the  related
transaction is actually settled.

   The  disclosure in Note 3 to the Financial Statements of the
amount  of derivative gains and losses "expected to be realized
in  earnings  during  the  next twelve months"  represents  the
projected  value  of  the  hedge over the  next  twelve  months
relative  to  what would be recorded had the hedge  transaction
not  been  entered into.  The amount is not a  forecasted  loss
incremental  to  normal operations, but rather it  demonstrates
the  extent  to  which  volatility  in  earnings  (which  would
otherwise exist) is mitigated through the presence of cash-flow
hedges.

Credit Risk

       See  Note  9 to Financial Statements for information  on
Credit Risk.


LIQUIDITY AND CAPITAL RESOURCES

Six  Months Ended June 30, 2001 Compared with Six Months  Ended
June 30, 2000

   For    information   concerning   liquidity   and   capital
resources, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations in TXU  Europe's
2000 Annual Report on Form 10-K (2000 Form 10-K).  Results for
the  three-month and six- month periods presented  herein  are
not  necessarily indicative of expectations for a full  year's
operations  because  of seasonal and other factors,  including
variations   in   maintenance  and  other  operating   expense
patterns. No significant changes or events which might  affect
the financial condition of TXU Europe have occurred subsequent
to  year-end other than as disclosed in other reports  of  TXU
Europe or included herein.

   Cash  generated  by  operating  activities  was  pounds   67
million  for  the six months ended June 30, 2001 compared  with
pounds  156  million for the same period in 2000.   Cash  flows
provided  by  operating activities before changes in  operating
assets  and  liabilities were pounds 205 million for  the  2001
period and pounds 144 million for the 2000 period.  Included in
the  2001 amounts were non-cash mark-to-market gains of  pounds
48  million.  Changes in operating assets and liabilities  used
pounds  138  million  for the six months ended  June  30,  2001
compared  with cash provided of pounds 12 million for the  same
period of 2000.  The lower cash flows from operating activities
is  primarily attributable to lower levels of receivables  sold
or  collateralized under the receivable securitization program,
to   reduced  cash  flows  from  UK  merchant  energy   trading
operations and to a replenishment of coal inventory at  certain
generating plants.

   Cash  provided  by  investing  activities  was  pounds   132
million  for  the six months ended June 30, 2001 compared  with
cash used in investing activities of pounds 167 million for the
same  period in 2000.  In the 2001 period, TXU Europe  received
pounds  325  million  from  the  sale  of  its  investment   in
Hidrocantabrico in Spain and a net pounds 102 million from  the
sale  of the North Sea gas assets.   Capital expenditures  were
pounds  108 million in 2001 compared with pounds 95 million  in
2000.   In  the 2001 period, TXU Europe acquired  Kiel  AG  for
pounds 145 million. The acquisition of investments in 2000  was
primarily   for   the   purchase  of   additional   shares   in
Hidrocantabrico.
                                23

<page>
   Cash  used for financing activities for the six months ended
June  30,  2001  was  pounds  673 million  compared  with  cash
provided  of  pounds 109 million for the same period  of  2000.
For  the  first  six months of 2001, long-term debt  borrowings
were pounds 107 million while repayments of long-term debt were
pounds  475 million, primarily for the early repayment  of  the
rent  factoring arrangement and scheduled payments  on  certain
capital  leases.   For  the six months  ended  June  30,  2000,
borrowings  of  long-term  debt were  pounds  474  million  and
repayments  were pounds 607 million. There also was  pounds  95
million of Preferred Securities of a subsidiary perpetual trust
issued in March 2000.

Financing Arrangements

   See  Note  6  to  Financial Statements for more  information
concerning  available  sources  of  short-term  and   long-term
financing.

Effect of Inflation

   Because   of   the   relatively  low  level   of   inflation
experienced in the UK, inflation did not have a material impact
on TXU Europe's results of operations for the periods presented
herein.

Regulation and Rates

     New  Licensing  Arrangements - Under the UK Utilities  Act
2000,  which became effective in April 2001, the concept  of  a
company  holding a "Public Electricity Supply License"  (a  PES
company)  will  be  abolished when  the  relevant  commencement
orders  are  laid before parliament.  This is  likely  to  take
place in the autumn of 2001, and a significant feature is  that
one entity will not be able to have legal ownership of both  an
electricity  distribution business and  an  electricity  supply
business.  Currently, the legal entity Eastern Electricity  Ltd
(a  wholly owned subsidiary of TXU Europe Group plc) is  a  PES
company.   In  accordance with the legislation the  electricity
supply  business included in Eastern Electricity  Ltd  will  be
transferred  to  an  affiliate company  (another  wholly  owned
subsidiary   of  TXU  Europe  Group  plc)  leaving   only   the
electricity  distribution business within  Eastern  Electricity
Ltd.   TXU  Europe  does not anticipate these new  arrangements
having  any  significant financial impact on  the  consolidated
financial statements.

     The  UK Utilities Act 2000 includes provision for the  Gas
and Electricity Markets Authority (the Regulator) to impose  on
a  license holder a financial penalty where the license  holder
has  contravened or is contravening a condition or requirement,
or has failed to achieve any standard of performance prescribed
under  the  legislation.   The financial  penalties  regime  is
scheduled  for  commencement later this year.   Such  penalties
will  be  subject  to  a maximum limit.  The  current  proposal
presently  undergoing public consultation is  for  the  maximum
limit to be set at 10% of the revenue of the company, generated
within  Great  Britain,  which is the holder  of  the  relevant
license. In addition it is currently proposed that the  maximum
penalty  at  the rate of 10% should apply to that  revenue  for
each  year in which the breach or failure took place, up  to  a
maximum  of three years.  TXU Europe is not presently aware  of
any   matters   that  would  make  it  subject  to  significant
penalties.

   New   Electricity  Trading  Arrangements  (NETA)  -NETA  was
implemented in the UK on March 27, 2001, replacing the  Pooling
and  Settlement Agreement (the Pool) arrangements for wholesale
electricity trading in England and Wales.  NETA provides  those
companies  wishing to buy and sell electricity the  freedom  to
enter  into directly negotiated contracts instead of having  to
trade  through  the  Pool.  Under the  new  arrangements,  bulk
electricity  is  traded  through a  variety  of  bilateral  and
physical  contracts.   Market  participants  include  not  only
generators  and  suppliers but also  traders,  such  as  energy
wholesalers,    with    physical    positions.     Accordingly,
implementation  of  NETA  has  eliminated  the  Pool.  The  new
arrangements provide mechanisms for near real-time clearing and
settlement  of  differences between  contractual  and  physical
positions  of  those buying, selling, producing  and  consuming
electricity.  A balancing mechanism enables the system operator
                                24

<page>
(National  Grid  Company) to change levels  of  generation  and
demand  to  near  real-time;  and  a  mechanism  for  imbalance
settlement provides for the settling of the differences between
net physical and net contractual position of parties.

   The  first  three months of NETA have been characterized  by
market  participants adapting their operations and  systems  to
accommodate new processes and requirements; furthermore, market
participants  have experienced either charges or  credits  from
the  balancing mechanism.   TXU Europe has had positive results
to  date. Requests for the modification to the NETA rules  have
been  made  by some participants, but TXU Europe expects  these
will  be  resisted.  The long-term effect of NETA  will  become
clearer   over  coming  months  when  many  business  customers
negotiate   power   contracts  with  suppliers   in   the   new
environment.  Prices could be reduced, but  volatility  in  the
NETA  Balancing  Mechanism could put  upward  pressure  on  end
prices.

     Another  consequence of the introduction of NETA  is  that
operators  of combined heat and power (CHP) plants  argue  that
they  have  been disadvantaged because their output is  usually
contracted  to produce heat and they can only sell  the  excess
power  surplus to their onsite needs at prices dictated by  the
balancing  mechanism. Government ministers  have  asked  for  a
report  from  OFGEM  on the impact of NETA  on  these  embedded
generators.


CHANGES IN ACCOUNTING STANDARDS

   New   Accounting  Standards  -  See  Note  2  to   Financial
Statements for a discussion of new accounting standards.


FORWARD-LOOKING STATEMENTS

   This  report  and  other presentations made  by  TXU  Europe
contain  forward-looking  statements  within  the  meaning   of
Section 21E of the Securities Exchange Act of 1934, as amended.
Although  TXU Europe believes that in making any such statement
its  expectations are based on reasonable assumptions, any such
statement  involves  uncertainties  and  is  qualified  in  its
entirety  by  reference to factors contained  in  the  Forward-
Looking  Statements section of Item 7. Management's  Discussion
and  Analysis of Financial Condition and Results of  Operations
in  the 2000 Form 10-K as well as general economic and business
conditions  in  the  UK  and in the service  area  for  Eastern
Electricity which has been opened to competition; unanticipated
changes in interest rates, in rates of inflation, or in foreign
exchange  rates; prevailing governmental, statutory, regulatory
or   administrative  policies  and  initiatives  affecting  TXU
Europe, its subsidiaries or the UK or European electric and gas
utility industries; general industry trends; regulation issues;
power  costs  and  availability; changes in business  strategy,
development  plans  or  vendor relationships;  availability  of
qualified personnel; changes in, or the failure or inability to
comply   with,  governmental  regulations,  including,  without
limitation, environmental regulations; changes in tax laws; and
access  to  adequate transmission facilities to  meet  changing
demands,  among others, that could cause the actual results  of
TXU  Europe to differ materially from those projected  in  such
forward-looking statements.

   Any forward-looking statement speaks only as of the date  on
which such statement is made, and TXU Europe does not undertake
any  obligation  to  update  any forward-looking  statement  to
reflect  events or circumstances after the date on  which  such
statement is made or to reflect the occurrence of unanticipated
events.   New factors emerge from time to time and  it  is  not
possible for TXU Europe to predict all of such factors, nor can
it assess the impact of each such factor or the extent to which
any  factor,  or combination of factors, may cause  results  to
differ  materially from those contained in any  forward-looking
statement.
                                25

<page>
Item  3.  Quantitative and Qualitative Disclosures About Market
Risk

   The  information  required hereunder  is  not  significantly
different  from  the  information as  set  forth  in  Item  7A.
Quantitative  and  Qualitative Disclosures  About  Market  Risk
included in the TXU Europe 2000 Form 10-K and is therefore  not
presented  herein. Changes in the fair value  of  TXU  Europe's
cash flow hedges for foreign currency, interest rate and energy
related  derivative contracts that were discussed in  the  2000
Form  10-K,  are recorded as a component of Other Comprehensive
Income  as  a result of implementation of SFAS No. 133.   Other
than  as  described therein, since December 31, 2000 there  has
been  no  significant  change  in  the  contractual  terms  and
notional  amounts of such derivatives as disclosed in  the  TXU
Europe 2000 Form 10-K.


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

   In  February 1997, the official government representative of
pensioners  (Pensions  Ombudsman) made  a  final  determination
against  the National Grid Company plc (National Grid) and  its
group trustees with respect to complaints by two pensioners  in
National  Grid's  section  of  the Electricity  Supply  Pension
Scheme  (ESPS).  The determination related to the  use  of  the
pension fund surplus resulting from the June 30, 1992 actuarial
valuation  of  the National Grid section to meet certain  costs
arising  from the payment of pensions on early retirement  upon
reorganization or downsizing.  This determination was set aside
by  the High Court on June 10, 1997, and the arrangements  made
by  National  Grid and its group trustees in dealing  with  the
surplus  were  confirmed.  The  two  pensioners  appealed  this
decision  to  the  Court of Appeal, and judgment  was  received
which endorsed the Pensions Ombudsman's determination that  the
corporation  was  not entitled to unilaterally  deal  with  any
surplus.  National Grid appealed the decision to the  House  of
Lords and, on April 4, 2001, the appeal was allowed.  The House
of  Lords  found  that National Grid was entitled  to  use  the
surplus funds as they had done.  As a result of the decision of
the House of Lords, TXU Europe considers that the likelihood of
a claim of this nature being made against it to be remote.



Item 6.      Exhibits and Reports On Form 8-K


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


     None

 (b)   Reports on Form 8-K filed since March 31, 2001, are  as
     follows:


     None

                                26

<page>







                           SIGNATURES


    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 thereunto duly authorized.





                                        TXU EUROPE LIMITED


                                       By  /s/ Paul C. Marsh
                                          -------------------
                                             Paul C. Marsh
                                      Chief Operating Officer



                                       By  /s/ Henry Davies
                                          -------------------
                                           Henry Davies
                                    Principal Accounting Officer




Date:  August 9, 2001


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